ProStrakan wins £27m boost for US plans

Published on Tuesday 23 October 2007 01:04

PROSTRAKAN, the Borders pharmaceutical company, has been given a $55 million (£27.1m) boost for its launch into the United States.

It has agreed a deal with NovaQuest, a US company that specialises in strategic partnerships with biotech companies, which will see ProStrakan grant sales royalties in return for having a sales force built and funded for three years.

The Galashiels-based company, which plans to launch products in the US next summer, starting with Sancuso, an anti-nausea patch for chemotherapy patients, expects a major part of its future revenue to be derived from the market.

Loss-making ProStrakan, whose move was praised by analysts as a low-risk way of establishing its own sales force, said it was effectively moving the cost of the team to a time when it would be cash generative. Chief executive Wilson Totten said entry into the world's largest pharmaceutical market is "transformational".

The deal will see NovaQuest invest about $45m recruiting and paying a 75-strong specialist sales force over three years, and up to a further $10m to launch and market Sancuso.

In return, NovaQuest will receive undisclosed royalty payments, tapering downwards over seven years, which brokers Morgan Stanley estimated would initially be 15-20 per cent, falling to low single-digits by year seven. NovaQuest is also granted the right to buy up to 2.6 million ProStrakan shares - currently about 1.2 per cent of the company - for 75.5p a share at any time over the next ten years.

When the three years is up, ProStrakan will have the option to take over the sales force as its own staff, giving it an experienced and established presence.

Prostrakan shares rose 3 per cent to 68p, on a day of losses for most Scottish listed companies.

Totten said it was "absolutely vital" for the company to have its own dedicated workforce in the US, the world's largest pharmaceutical market, to maximise the revenue from existing drugs.

He said: "It's a way of managing our finances in a very elegant way ... and having our own sales force in the US is undoubtedly a transformational event. It has been the driving force behind other companies and it's what will drive us into profitability."

A move into the US has been a priority for the company's management for some time. ProStrakan considered out-licensing its drugs to a third party, which Totten said would be lower risk but would reduce the potential return.

Building a sales force from scratch at its own expense would push back its move into profitability, which ProStrakan reiterated yesterday was expected by the end of 2009.

Totten said the naming of an experienced partner would also enable it to in-licence other drugs, for the US, which he said was key to its business model. NovaQuest is experienced in the field of building bespoke sales teams for the pharmaceutical industry, recruiting more than 45,000 sales staff in the past.