NeoTherapeutics Signs Deal With Pfizer; Stock Jumps

Investors swept up shares of NeoTherapeutics Inc. on Monday after the Irvine biopharmaceutical company announced a license agreement with Pfizer Inc. worth up to $12 million.

NeoTherapeutics, which until now has not generated revenue, will receive an initial payment from Pfizer.

That payment won’t be enough to boost NeoTherapeutics into profitability for its first quarter because its clinical trial costs are rising for its other components, said John McManus, vice president of investor relations.

But the news was enough to boost the company’s stock 60% to $6.19 a share Monday before it settled to close at $5.19, a gain of $1.31 a share on Nasdaq.

The company’s NeoGene Technologies unit will allow Pfizer to use an orphan receptor it identified in exchange for the initial payment plus periodic payments for potential drugs developed using the technology.

Orphan receptors are genetic materials that direct a specific physiological function, such as migraines or obesity. What sets orphan receptors apart is that their genetic function remains a mystery.

NeoTherapeutics’ deal with Pfizer covers one orphan receptor. NeoTherapeutics has identified the functions of five orphan receptors to date.

Drug companies like Pfizer develop drugs to turn a receptor off or on once the function is discovered.

McManus said NeoTherapeutics is discussing possible licensing agreements concerning its orphan receptors and other receptors with additional companies.

In December, Societe Generale bought a 4% stake in the unit for $2 million, giving the unit an implied market value of $50 million, he said.

“Now it [the unit] is a more valuable company,” McManus said. “Hopefully, that will translate into value for the parent company.”

The company’s stock had hit its all-time high of $24.25 a share early last March, but fell to its 52-week low of $2.22 a share in January.

For the first nine months last year, NeoTherapeutics posted a loss of $34.9 million, or $3.69 a share.