Nektar Therapeutics (NKTR.O) said it agreed to sell its future royalties on two drugs to Royalty Pharma for $124 million, to help repay debt.
The news sent the biopharmaceutical company's shares up as much as 15 percent to $7.80 on Wednesday, making it one of the top gainers on the Nasdaq.
Nektar will sell the royalties of its Crohn's disease treatment Cimzia and chronic kidney disease treatment Mircera and hopes to use the proceeds to partly repay its $215.0 million of convertible debt.
The company had licensed Cimzia to UCB Pharma and Mircera to Roche ROG.VX and had earned $8.3 million in royalties from the two drugs in 2011.
"This is a good deal for (Nektar) because it is non-dilutive," said MKM Partners analyst Jon LeCroy, adding that otherwise, the company's equity base would have been diluted by 30 million shares.
If certain sales milestones on the drugs are not met, then Nektar will pay RPI Finance Trust, an affiliate of Royalty Pharma, up to $3 million for 2013 and up to $7 million in 2014.
Morgan Stanley & Co. acted as the financial adviser to Nektar.
New York-based Royalty Pharma specializes in acquiring royalty interests in marketed and late-stage biopharmaceutical products.
San Francisco, California-based Nektar will now focus on the late stage trials of its drug, NKTR 118, targeted at Opioid Induced Constipation.
AstraZeneca (AZN.L), which is responsible for development and commercialization of NKTR 118, is planning to submit the marketing application in 2013. "We estimate over $1 billion in peak sales of the drug," LeCroy said.
(Reporting by Balaji Sridharan in Bangalore; Editing by Sreejiraj Eluvangal)