Immunomedics, Inc. (NASDAQ:IMMU) And Seattle Genetics, Inc. Deal Comes With An Open End

Immunomedics Inc.

Immunomedics, Inc. (NASDAQ:IMMU) recently announced that it was pursuing an in-licensing deal with Seattle Genetics, Inc., which will give latter, the commercial rights to former’s breast cancer drug IMMU-132. As per the terms of this deal, Immunomedics, Inc. will allow Seattle Genetics to acquire global development along with commercialization rights to its IMMU-132 breast cancer drug for an upfront payment of $250 million. Apart from this, Immunomedics, Inc. shall also be eligible for potential milestone payment of $1.7 billion, along with equity investment and tiered double digit royalties.

The deal with an open end

While the Immunomedics, Inc. has announced about the deal, it also said that until 19 February 2017, it shall continue to find other suitors. The company will look for “limited number of parties” interested in the deal. In case, the company manages to find a better suitor, who is willing to offer a profitable deal, Seattle Genetics, Inc. will go on to match that matter. If Immunomedics, Inc., in the meanwhile, declines the match offer too, the terms of agreement shall deem to cease with termination of agreement.

In response to the news story, the shares of Immunomedics and Seattle Genetics tossed and showed much flips. While Immunomedics’ shares soared up 21% to $5.21, Seattle Genetics shares sank 4% to $60.14.

J.P. Morgan’s commentary on the case

In the meanwhile, an analyst at J.P. Morgan, Cory Kasimov said that IMMU-132 is an attractive offer for Seattle Genetics because of its technology and efficacy/safety results. The breast cancer drug from Immunomedics comes with an USFDA assigned Breakthrough Therapy Designation.

J.P. Morgan believes that albeit the deal will not fetch immediately thesis changes, yet there is a chance for Seattle Genetics to diversify the commercial portfolio rather spontaneously than what its present pipeline of products would allow.

Nevertheless, the deal shall prove to be a win-win for Immunomedics, which at present, is in a stronger position to negotiate the deal. Meanwhile, Seattle Genetics shall be chasing this deal to make it profitable for itself, and some real value addition to its portfolio.