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Myovant shares soar 27% on news of Pfizer prostate cancer drug collaboration worth up to $4.2 billion

Shares of Myovant Sciences soared 27% Monday, after its parent Sumitovant Biopharma unveiled an agreement with Pfizer Inc. to jointly develop a treatment for prostate cancer and women’s health in a deal worth up to $4.2 billion in upfront and potential milestone payments.

Myovant MYOV, +27.21%  will receive an upfront payment of $650 million to develop and market relugolix, a once-daily, oral gonadotropin-releasing hormone (GnRH) receptor antagonist, which won approval from the U.S. Food and Drug Administration in December as a treatment for advanced prostate cancer.

If approved, the two companies will also develop and market relugolix combination tablet (relugolix 40 mg, estradiol 1.0 mg, and norethindrone acetate 0.5 mg) targeting women’s health in the U.S. and Canada. They will start co-promoting the treatment, which will be sold as Orgovyx, as a prostate cancer treatment in early 2021.

See: Bayer Prostate cancer drug approved in China

The companies will equally share profits and certain costs, while Myovant will record revenue. Myovant will also be responsible for interactions with the regulator and for drug supply and clinical development. The company will be entitled to $200 million in potential regulatory milestones for FDA approvals for relugolix combination tablet in women’s health, and to tiered sales milestones upon reaching up to $2.5 billion in net sales for prostate cancer and women’s health indications.

“There continues to be a high unmet need among the millions of women who experience the common and debilitating symptoms associated with uterine fibroids and endometriosis,” said Nick Lagunowich, global president, Pfizer Internal Medicine PFE, -1.34%  .

Evercore analyst Josh Schimmer said the deal is positive for Myovant.

“After having some time to digest it, we like it,” Schimmer wrote in a note to clients. “While It gives up half the economics of relugolix (which we hadn’t modelled), that’s adequately offset by adding PFE’s commercial efforts as well as the billions of milestones which we think are achievable.”

Read also:Mammograms and colonoscopies fell by up to 70% in the early months of COVID-19

He reiterated his outperform rating on the stock and $55 price target, saying the stock is one of his stop mid-cap picks.

“Investors had been worried that Sumitomo’s majority stake in MYOV might limit strategic partners down the road,” he said. “This deal adds another strong company with potentially valuable synergies.”

See also:AstraZeneca drug recommended for ovarian cancer

Myovant is one of five companies under the Sumitovant umbrella.

Prostate cancer is one of the most comment among men, apart from skin cancer, according to Cancer.net. An estimated 191,930 men will be diagnosed with the illness this year, about 60% of whom will be over 65.

Myovant shares have gained 84% in 2020, while the SPDR S&P Biotech ETF XBI, -0.69%  has gained 57% and the S&P 500 SPX, +0.87%  has gained 16%.

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