KalVista Pharma Wins Big on Merck Collaboration

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KalVista Pharmaceuticals Inc. (NASDAQ: KALV) saw its shares absolutely explode early on Tuesday after it was announced that the firm would be collaborating with Merck & Co. Inc. (NYSE: MRK). Ultimately the collaboration is to further develop KalVista’s investigational intravitreal injection candidate for the potential treatment of diabetic macular edema (DME).

Under the terms of the agreement, KalVista has granted to Merck certain rights, including 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.

The firm also has granted to Merck 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.

As consideration for the agreement, Merck will pay to KalVista a $37 million nonrefundable upfront fee. KalVista is eligible to receive more 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.

Apart from the upfront payment and potential milestone payments, KalVista will receive 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.

Additionally, so both companies have some skin in the game, KalVista has entered into a $9.1 million private placement transaction with Merck in which Merck acquired roughly 1.07 million shares of KalVista, representing a 9.9% ownership stake, at a price of $8.50 per share.

Shares of KalVista closed Monday at $7.38, with a consensus analyst price target of $18.00 and a 52-week trading range of $5.48 to $10.65. Following the release, the stock was up about 87% at $13.80 in early trading indications Tuesday.

Merck shares were last seen at $64.33, with a consensus price target of $70.00 and a 52-week range of $58.29 to $66.80.