Bloomberg News

Threshold Gains on Merck KGaA Partnership: San Francisco Mover

February 09, 2012

(Updates with closing shares in second paragraph.)

Feb. 3 (Bloomberg) -- Threshold Pharmaceuticals Inc. surged the most ever after German drugmaker Merck KGaA agreed to pay as much as $525 million for the right to jointly develop and sell a drug for cancer.

Threshold more than doubled to $2.99, the biggest single- day jump for the Redwood City, California-based company since the shares started trading publicly in February 2005, according to data compiled by Bloomberg. The stock is up 70 percent in the last 12 months.

Merck will pay $25 million upfront for some rights to TH-302, an experimental medicine being tested in soft-tissue sarcoma and pancreatic cancer, the companies said today in a statement. Threshold is eligible for an additional $35 million this year if development goals are met, and total potential payments are $525 million, the companies said.

“The deal has several favorable aspects,” Eric Schmidt, an analyst with Cowen & Co. in New York, wrote in a research note today. “It provides relief from a near-term financing overhang, validation of TH-302’s potential from an external party, the financial resources ability to expand TH-302’s development beyond pancreatic cancer and sarcoma, and Threshold with the ability to retain much of its strategic value by virtue of its U.S. co-promote option.”

Threshold expects to receive data from a mid-stage trial for advanced pancreatic cancer this month. As part of the deal, Darmstadt, Germany-based Merck will pay Threshold $20 million for positive results in that trial. The drug is also in a late- stage clinical trial for patients with soft-tissue sarcoma, and Threshold is studying it in other cancers.

Merck will receive co-development rights and exclusive worldwide marketing rights to the medicine, and Threshold will have the option to market the treatment in the U.S.

Threshold will develop TH-302 in the U.S. for soft-tissue sarcoma. The two companies will jointly develop the therapy for all other indications, and Merck will pay 70 percent of worldwide development costs, the companies said.

--Editors: Bruce Rule, Andrew Pollack

To contact the reporters on this story: Allison Connolly in Frankfurt at aconnolly4@bloomberg.net; Meg Tirrell in New York at mtirrell@bloomberg.net

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net; Phil Serafino at pserafino@bloomberg.net


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