KalVista Pharmaceuticals Signs a Lucrative Strategic Agreement with Merck

– The Agreement Covers the Development of Investigational Plasma Kallikrein Inhibitors for Diabetic Macular Edema (DME)

– Upfront Fee ($37 Million).  Potential Milestone Payments. Royalties On Sales. The deal could be worth $750 million

 – Merck Acquires 9.9% Stake in KalVista in Private Placement.   

 – Phase 2 Clinical Trial for the Investigational Intravitreal DME Candidate KVD001 Still Planned to Initiate in 2017.

Surprise?

Indeed, it is. KalVista Pharmaceuticals (KALV) is barely visible on the screens of most investors in the pharmaceutical and biotechnology industries. Those who are familiar with this firm, including many of its shareholders, did not expect it to realize its expressed wishes of developing its lead products by a large pharmaceutical company so quickly. But here we are, one of the most admired firms with inspired scientists and gifted management, Merck, known as MSD outside the United States and Canada, seems to like what it saw came forward made a deal and bought near 10% of the firm.

In the News, KalVista Pharmaceuticals entered into a collaboration agreement with Merck, through a subsidiary, for the product KVD001, KalVista’s investigational intravitreal (IVT) injection candidate in development for potential treatment of diabetic macular edema (DME), as well as future oral DME compounds based upon plasma kallikrein inhibition.

After expressing the firm’s pleasure with Merck’s collaboration, Andrew Crockett, Chief Executive Officer of KalVista said, “Plasma kallikrein inhibition is a novel approach to the treatment of DME that we believe may offer benefit to a significant number of patients, and an oral therapy particularly would represent a groundbreaking advance for treatment of this indication. We have always believed that development and commercialization of our DME therapies would require the resources of a large pharmaceutical company, and we believe Merck has the wherewithal and resources to help us advance development of our DME drug candidates. Importantly for KalVista, this collaboration also meets our strategic objectives of maintaining control of our oral HAE portfolio that we plan to develop independently. We look forward to providing more details about the Phase 2 trial for KVD001 in DME patients as the trial commences.”

THE BEEF

Under the terms of the agreement, KalVista has granted Merck the following:  

– An option to acquire KVD001 through a period following completion of the Phase 2 proof-of-concept trial that KalVista intends to commence later this year.

– A similar option to acquire investigational orally delivered molecules for DME that KalVista will continue to develop as part of its ongoing research and development activities.

Merck’s Obligations:

– Make Payment of a $37 million non-refundable upfront fee to to KalVista.

– Make Payments associated with the exercise of the options by Merck and the achievement of milestones for each program that potentially total up to $715 million.

– Pay KalVista tiered royalties on net sales for therapeutic candidates commercialized under this agreement.

KalVista will fund and retain control over the planned Phase 2 clinical trial of KVD001 as well as development of the investigational oral DME compounds through Phase 2, unless Merck exercises its options earlier.

Merck has acquired 1,070,589 shares of KalVista, representing a 9.9% ownership stake, at a price of $8.50 per share. This private placement closed concurrent with execution of the Option Agreement.

Ben Thorner, senior vice president at Merck said, “The KalVista team has already made important progress in advancing this candidate into the clinic. At Merck, we look forward to the opportunity to apply our expertise and resources upon the achievement of proof of concept for KVD001. Merck is seeking to collaborate on the development of candidates that we believe have the potential to transform practice in areas where there is a clear need for new and improved therapeutic options.”

P.S. The agreement with Merck covers only the investigational IVT and oral plasma kallikrein inhibitor programs for DME. KalVista retains full rights to its oral hereditary angioedema (HAE) portfolio, and will have the opportunity to select and develop future oral HAE compounds.

KalVista Pharmaceuticals, Inc.

KalVista Pharmaceuticals is focused on the discovery, development, and commercialization of small molecule protease inhibitors for diseases with significant unmet need. The initial focus is on inhibitors of plasma kallikrein, which is an important component of the body’s inflammatory response and which, in excess, can lead to increased vascular permeability, edema and inflammation.

KalVista’s pipeline comprises:

– Novel, small molecule plasma kallikrein inhibitors initially targeting hereditary angioedema (HAE) and diabetic macular edema (DME).

– A structurally diverse portfolio of ORAL plasma kallikrein inhibitors from which it plans to select multiple drug candidates to advance into clinical trials for HAE. The first candidate of this planned portfolio, KVD818, is currently in a first-in-human study and additional program candidates are in preclinical development.

The intravitreally administered plasma kallikrein inhibitor known as KVD001, which is the most advanced product in KalVista’s pipeline. The product has successfully completed its first-in-human study in patients with DME and is being prepared to conduct Phase 2 studies in 2017.

Prohost Observations

KalVista/Merck agreement was what the small development-stage wished for as stated by the firm’s Chief Executive Officer Andrew Crockett in the firms’ joint press release. There ate many reasons to believe that KalVista’s molecules are valuable as they fill unmet needs to be explained in other future postings. This is obvious, as these molecules attracted Merck’s attention that made it sign the agreement and by almost 10% of the small firm. Achieving proof of concept could raise the possibility of a total acquisition.

KalVista stock closed at $10.19 UP $2.81, i.e., 38.08%.

 Its market CAP is $98.97, which is extremely low, not reflected any value for the firm’s technology, or products.

Its 52-week range is $5.48 – $15.80.

The firm’s products are still in early development. However, based on Merck’s double enthusiasm, especially towards KalVista’s scientific and technical achievements and its description of this small firm’s products’ importance, we decided to add this firm to the Prohost Portfolio portfolio with a 1st target $16.      

Prohost Forward-Looking Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our ‘opinions’ and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing in the stock market has many risks, including loss of money and more.

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