In a deal that marks its transformation to a pure-play radiopharmaceutical company, Neoprobe (NYSE Amex:NEOP) has completed the sale of its radiation detection business to Devicor Medical Products.
The deal’s value could reach $50 million for Dublin, Ohio-based Neoprobe — $30 million up front and $20 million in royalties if Devicor’s sales of the acquired products exceed $21 million in any of the next five fiscal years, according to separate statements from the two companies.
Devicor agreed to buy Neoprobe’s radiation-detection device business in May. Neoprobe shareholders approved the deal Monday.
Along with the sale of the device — a hand-held radiation detector for surgical use — Neoprobe sold its name. The device business’s price would’ve been lower without it, CFO Brent Larson told Columbus Business First.
Neoprobe management is still brainstorming a new corporate identity and will come up with something by fall and the name change will also necessitate a new ticker symbol.
Devicor is a Wisconsin-based holding company backed by Chicago private equity firm GTCR Golder Rauner. Last year, Devicor bought Johnson & Johnson’s Mammotome breast cancer business.
For Neoprobe, the deal serves two purposes. First, it allows the Ohio company to focus on its two radiopharmaceuticals, Lymphoseek and RIGS. Lymphoseek is used by surgeons to identify lymph nodes in patients with breast cancer or melanoma and to indicate whether cancer has spread to a particular lymph node. Last week the company filed a New Drug Application for regulatory approval of Lymphoseek, which could come from the U.S. Food and Drug Administration around the middle of next year.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Second, the deal gives Neoprobe some much-needed cash to buy candidates to fill its pipeline between Lymphoseek and RIGS, which is likely several years away from commercialization. With such a wide gap between potential product launches, Neoprobe will almost certainly seek to acquire a company or license a drug to fill that gap.
