Why the Kazia Therapeutics (ASX:KZA) share price is rocketing 11%

The Kazia Therapeutics Ltd (ASX: KZA) share price is shooting for the moon today. The positive movement comes after the company announced a licence agreement to sell a brain cancer treatment in Greater China.

Kazia is an oncology-focused biotech company. It is working on several forms of cancer treatment, including for brain cancer and ovarian cancer.

At the time of writing, shares in the medical company are trading at $1.61 – up 11.03%. By comparison, the All Ordinaries Index (ASX: XAO) is up 0.36%.

Let’s take a closer look at Kazia’s announcement.

Licence agreement in Greater China

The Kazia share price is rocketing after the dual-listed company revealed it has entered into a licensing agreement with Simcere Pharmaceutical Group Ltd. The purpose of the agreement is “to develop and commercialise Kazia’s investigational new drug, paxalisib, in Greater China.” Paxalisib is used in the treatment of brain cancer.

Under the deal, Simcere will develop, register, and commercialise paxalisib in Mainland China as well as in Hong Kong, Macau, and Taiwan. Kazia holds the rights to the drug in all other nations. Kazia will receive an upfront payment of US$11 million. Simcere will divide the payment into US$7 million in liquidity and a US$4 million equity investment. The equity investment is priced at a 20% premium on the most recent price.

Kazia also pointed out it retains the right to commercialise the drug in the United States, where profit margins are higher. 

Simcere will pay Kazia up to US$281 million, depending on milestones being met on the treatment of glioblastoma – an aggressive form of brain cancer. Further payments may be payable if the drug is found to be effective in other types of brain cancer.

Management commentary

Kazia CEO Dr James Garner spoke on the deal. He said:

China is one of the world’s largest pharmaceutical markets, with specific requirements and opportunities for innovative oncology products. We are delighted to partner with Simcere to secure the commercial success of paxalisib in this critical territory. Simcere’s track record of success is unrivalled, and they bring to paxalisib first-class capabilities in clinical development, regulatory affairs, and commercialisation. We look forward to working closely with our new partners to make paxalisib available for Chinese patients as swiftly as possible.

Dr Renhong Tang, Senior Vice-President at Simcere, added:

We are tremendously excited by the potential for paxalisib to make a difference in this very challenging disease. The need for new therapies in brain cancer is significant in China, and we share Kazia’s commitment to bringing forward new treatment options for patients.

Kazia share price snapshot

Over the last 12 months, the Kazia share price has increased by around 335%. Just since the beginning of this year, Kazia shares have increased by more than 35%. The share price hit a 52-week high of $1.78 in November after the company released positive clinical data about paxalisib.

Kazia has a market capitalisation of around $184 million.

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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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