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Obseva (OBSV) Stock Soared After Selling Its Rights for $113M

Simon Mugo trader
Updated 22 Nov 2022

The Obseva SA (NASDAQ: OBSV) stock price rallied 76.22% after revealing that it had sold all of its rights to Ebopiprant to XOMA Corporation for an upfront payment of $15 million and future milestone payments that will not exceed $98 million, bringing the total consideration to $113 million.

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YOUR CAPITAL IS AT RISK. 68% OF RETAIL CFD ACCOUNTS LOSE MONEY.


Investors cheered the announcement, given that Obseva shares are currently worth $14.21 million. However, I believe the stock should have rallied much higher since the initial amount payable to Obseva is worth more than the company’s current market valuation.

The biopharmaceutical company revealed that it would use the sale proceeds to repay the existing debts it had initially been unable to service. Therefore, the company intends to request a withdrawal of the moratorium proceedings it had requested before Swiss courts. 

The upfront payment will give Obseva more than one year of cash runway, leaving it in a strong financial position. After that, the company intends to shift its focus to nolasiban, a novel, oral oxytocin receptor antagonist that could improve clinical pregnancy and live birth rates in women pursuing in vitro fertilization. 

Obseva still has exclusive, worldwide commercial rights for nolasiban, except for the People’s Republic of China.

Brian O’Callaghan, the ObsEva CEO, said: “The sale of the Ebopiprant license agreement both strengthens our immediate financial position while providing the potential for future upside for shareholders. The transaction marks the successful completion of a restructuring process whereby we have extracted material savings through the assignment of contracts, streamlined our organizational structure, and restructured our debt.”

Ebopiprant is an investigational, orally active, selective prostaglandin F2α (PGF2α) receptor antagonist, which is being studied as a potential treatment for preterm labor by reducing inflammation and uterine contractions. 

Obseva sold all its rights to the drug molecule, including its license agreements with Organon and Merck KGaA, Darmstadt, Germany, and the entire intellectual property estate. In addition, the Organon agreement entitles Obseva to receive milestone payments up to a maximum of $98 million. 

Investors cheered the news, but OBSV shares had retraced some of their earlier gains at writing. 

*This is not investment advice. 

Obseva (OBSV) stock price.

The ObsEva stock price rallied 76.22% to trade at $0.29, rising from Monday’s closing price of $0.1657.

Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading