NeurogesX announces $40 million royalty financing agreement with Cowen Royalty

NeurogesX, Inc. (Nasdaq: NGSX), a biopharmaceutical company focused on developing and commercializing novel pain management therapies, announced today that that it has entered into a $40 million royalty financing agreement with Cowen Healthcare Royalty Partners, L.P. ("Cowen Royalty"). The agreement creates a debt obligation that will be repaid through and secured by royalties and future milestone payments payable to NeurogesX under its Distribution,  Marketing and License Agreement (the Astellas Agreement) with Astellas Pharma Europe Ltd. (Astellas) for NeurogesX' Qutenza® (capsaicin) 8% patch, a dermal delivery system containing prescription strength capsaicin.

Qutenza is marketed in the U.S. by NeurogesX for patients with postherpetic neuralgia (PHN). NeurogesX retains all economics resulting from the U.S. market, and Cowen Royalty is not entitled to any payment on U.S. sales.

Under the terms of the royalty financing agreement, Cowen Royalty will be entitled to receive up to 100% of all royalties and sales milestones, as well as certain other payments due to NeurogesX under the Astellas Agreement. After the debt obligation has been fulfilled, payments under the Astellas Agreement will revert to NeurogesX. At any point NeurogesX can retire the Cowen financing and regain access to 100% of its European royalty interest in Qutenza®.  

The Astellas Agreement provides for royalties on net sales of Qutenza in the Astellas Territory: the European Economic Area, including all 27 EU-member states, Iceland, Norway, and Liechtenstein; Switzerland; and certain countries in Eastern Europe, the Middle East and Africa. The Astellas Agreement also provides for total sales milestones and license option payments of up to euro 70 million related to Qutenza and the company's product candidate, NGX-1998.  

Stephen Ghiglieri, Chief Operating Officer and Chief Financial Officer commented, "We are very pleased to announce this royalty financing with Cowen Healthcare Royalty Partners. We believe this structure provides us with capital to continue executing our operating plan through at least 2011. Importantly, this royalty financing agreement only encumbers revenues generated from the territory currently licensed to Astellas, and does not involve revenues arising from our U.S. operations or other world markets. This desirable feature allows for future financing flexibility as we move forward."

Gregory B. Brown, M.D., Co-Founder and Managing Director of Cowen Royalty, stated, "Qutenza is a unique locally acting therapy, offering a significant benefit for patients. We believe that Astellas is well positioned to capitalize on the European neuropathic pain market. Our team consistently seeks out differentiated products with strong marketing partners, and we believe this transaction with NeurogesX affords a significant and attractive market opportunity for our investors, while providing a non-dilutive source of financing to maximize both the Qutenza opportunity and the potential value creation for NeurogesX shareholders."

Additional details on the loan agreement can be found in the Current Report on Form 8-K that will be filed by NeurogesX with the Securities and Exchange Commission on or about the date hereof.