Is There Any Reason As To Why The ObsEva (OBSV) Stock Expanding 57%?

Following the announcement of a licensing deal, shares of ObsEva SA (NASDAQ: OBSV) were up 56.91% to trade at $0.26 in pre-market at the last check.

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What was the deal that OBSV agreed into?

ObsEva (OBSV) announced today that XOMA Corporation has purchased all of the company’s rights to Ebopiprant (XOMA). ObsEva signed the contract for a $15 million down payment and potential future milestone payments of $98 million. OBSV anticipates that the sale proceeds will allow it to pay off its current over-indebtedness, end its previously announced moratorium proceedings before Swiss courts, and put it in a position to once again meet the minimum stockholder equity requirements necessary for continued listing on The Nasdaq Stock Market (the “Nasdaq”).

The sale of the Ebopiprant licensing agreement both improves its current financial situation and offers stockholders the chance for possible future gains. With this sale, OBSV has successfully completed a restructuring process in which it reduced its organizational structure, restructured its debt, and extracted significant cost savings from contract assignments. The company intends to focus its resources on nolasiban, a novel oral oxytocin receptor antagonist being developed to increase clinical pregnancy and live birth rates in women undergoing in vitro fertilization, while also considering strategic options to maximize shareholder value.

With the receipt of the upfront payment, OBSV anticipates having more than a year of cash runway and an improved strategic position. The People’s Republic of China is the only country where nolasiban’s commercial rights are not exclusively held by ObsEva. According to the terms of the contract with XOMA, OBSV has sold and assigned to XOMA all of its rights to Ebopiprant, an investigational, orally active, selective prostaglandin F2 (PGF2) receptor antagonist being studied as a potential treatment for preterm labor by reducing inflammation and uterine contractions, including the Company’s license agreements with Organon and Merck KGaA, Darmstadt, Germany.

In addition to the $15 million in cash received up front, OBSV is qualified to receive up to $98 million in accordance with the Company’s license agreement with Organon for Ebopiprant, which was sold to XOMA in the transaction, upon reaching specific development and regulatory milestones and sales milestones. ObsEva licensed Organon in July 2021 to use Ebopiprant for commercial, manufacturing, and development purposes worldwide.

How will OBSV carry out the transaction?

A Consent and Amendment Agreement (the “Consent”) between ObsEva (OBSV) and JGB Management, Inc. (JGB) was signed in conjunction with the transaction’s closing. Under the terms of the Consent, JGB approved of OBSV’s deal with XOMA, and ObsEva agreed to keep restricted cash equal to the outstanding principal balance of the outstanding convertible notes held by specific funds and accounts managed by JGB, subject to reduction upon conversion or payoff of the notes.