Oasmia buys estrogen receptor cancer drug, raises cash

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Oasmia Pharmaceutical ($OASM) has bought the estrogen receptor beta agonist KB9520 from Karo Pharma (STO:KARO). The deal ends Karo’s long search for someone to take on the asset and adds a preclinical cancer program to Oasmia’s pipeline at a time when its coffers are freshly replenished.

Uppsala, Sweden-based Oasmia is paying its compatriot SEK 25 million ($2.8 million) in stock for the drug. And, if Oasmia can guide the drug all the way to market, Karo will take 20% of its revenues. The cost of taking KB9520 past the multitude of hurdles that stand between it and such sales will fall on Oasmia.

The small upfront payout reflects just how far KB9520 has to go. Karo started developing KB9520 years ago--the program was discussed in 2011 in the journal Leukemia--but its commitment to the asset has waned as its focus has shifted in recent years. The shifts led Karo to seek a buyer for the drug, but it struggled to find an offer it deemed adequate.

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By persuading Karo to accept its offer, Oasmia has gained a cancer program to advance alongside its XR-17-based pipeline assets. XR-17 is best known as the excipient Oasmia uses to encapsulate its formulation of paclitaxel, which came through a Phase III ovarian cancer trial earlier this year. The use of XR-17 means the formulation is free of Cremophor EL, an excipient linked to allergic reactions.

With the paclitaxel formulation nearing regulatory approval decisions on both sides of the Atlantic, Oasmia is stepping up its focus on its pipeline. The acquisition of KB9520 is one part of the strategy. The other part will see Oasmia commit cash to develop more human and veterinary medicines based on its XR-17 excipient. To fund the work, Oasmia has put together a SEK 70 million private placement.

Oasmia shares rose 17% in Stockholm on the back of the KB9520 deal and private placement. Karo, in contrast, slid 8%. The deal strips Karo, which until recently was known as Karo Bio, of another link to its past. Karo made its name and landed deals with firms including Merck ($MRK) on the strength of its work on estrogen receptors, but its pipeline never lived up to expectations.

Now, with Oasmia buying the cancer program and Karo morphing into a commercial-stage healthcare company, an estrogen receptor beta multiple sclerosis drug it has yet to offload is the only remnant of these earlier glories.