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Novo Nordisk (NVO - Analyst Report) recently announced that it has granted total development and commercialization rights to anti-NKG2A antibody to Innate Pharma.

The first-in-class immune checkpoint inhibitor, anti-NKG2A (IPH2201), is being developed for the treatment of rheumatoid arthritis. The phase I study data on anti-NKG2A showed a good safety profile at both single and multiple administrations. Innate Pharma will evaluate anti-NKG2A in immuno-oncology with studies commencing in 2014.

Under this deal, Novo Nordisk will receive €2 million in cash and 600,000 shares of Innate Pharma. The acquisition of Innate Pharma shares is subject to approval by Innate’s shareholders on Mar 27, 2014. We note that Novo Nordisk is already a minority shareholder in Innate Pharma.

Novo Nordisk is also eligible to potential registration milestone payments of up to €20 million. Novo Nordisk will also receive single-digit tiered royalties on future sales.

This licensing deal represents Innate Pharma’s leadership in immuno-modulating antibodies targeting the innate immune system.

We note that in Apr 2006, Novo Nordisk and Innate Pharma had formed a partnership to research and develop drugs targeting natural killer (NK) cells. Novo Nordisk had then in-licensed anti-NKG2A from Innate Pharma.

Anti-NKG2A was the third therapeutic antibody generated from their partnership to enter clinical trials and the second targeting a checkpoint receptor (after lirilumab).

Novo Nordisk carries a Zacks Rank #4 (Sell). Novo Nordisk shares rose 3.7% on the news. Some better-ranked players in the pharma industry include Actelion Ltd. (ALIOF), Endocyte Inc. (ECYT - Snapshot Report) and Salix Pharmaceuticals Ltd. (SLXP - Analyst Report). All the three stocks carry a Zacks Rank #1 (Strong Buy).

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