If the acquisition does not go through, Bristol-Myers Squibb will gain rights to the epothilones program for $25 million upfront.

Bristol-Myers Squibb intends to purchase Kosan Biosciences for approximately $190 million in cash. This total was reached after deducting Kosan’s projected net cash balance at June 30 from the acquisition value.

Under the definitive merger agreement, Bristol-Myers Squibb will pay $5.50 per share. The offer is more than triple Kosan’s stock price at close of trading yesterday, which was $1.65. Kosan’s value rose steeply to open the day at $5.42.

Bristol-Myers Squibb’s interest in the firm is underscored by a separate exclusive worldwide license agreement that will take effect if the acquisition falls through. If the merger is terminated due to an intentional breach by Bristol-Myers Squibb of its covenants under that agreement, howerver, the license arrangement will not take effect. This deal calls for $25 million upfront, milestones fees, and royalties.

While the takeover would add two classes of cancer drugs to Bristol-Myer’s Squibb pipeline, the license deal will give the firm one of the two, namely epothilones. The other anticancer agents are part of the Hsp90 class of compounds.

Under the license agreement, Bristol-Myers Squibb will gain epothilones-related intellectual property, data, and IND applications.

Kosan’s epothilone program consists of one compound in Phase II and one in preclinical development. Its Hsp90 inhibitor pipeline comprises one Phase III candidate and several supportive and label-extension trials. Kosan also has two other drugs in early development.

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