Lasar, CombinatoRx may be getting the lower end of that percentage range. Because "In addition, Covidien will pay royalties to Neuromed AND ALZA Corporation based on commercial sales of Exalgo." (see link below).
Covidien is not going to let royalty payments ruin profitability. Within reason and probably on the lower end, CombinatoRx and ALZA will get paid. Royalty as a whole is split between the two, although probably not evenly.
This is why I think we really have to look forward to Synavive.
Exalgo seems intuitively better as it has the advantage of being ER, Extended Release, and it seems to control pain very well. The only concern is abuse. JNJ knows all of this.
This is why JNJ wants to promote Nucynta as, "It is the first new molecule in analgesia in over 25 years for the relief of moderate to severe acute pain in patients 18 years of age or older." Promoting the fact that it will have less abuse.
Perhaps JNJ thought Exalgo would not get approval or will shortly be taken off the market because of abuse? I guess it does not matter because they cannot even seem to make Tylenol these days without messing it up.
The bottom line is this: JNJ is moving forward with Nucynta Extended Release. The clinical trial is currently underway. Do not underestimate JNJ's ability to move the price down to put the squeeze on Exalgo. JNJ can also put a 1000 person salesforce on the ground in a day. They have more resources than Covidien.
Keep an eye on this one guys. Personal dealings with Ethicon (a JNJ division). Let me tell you! That's all I will say. This will likely cut into Exalgo's profit in a few years. Right now we are ok, but CombinatoRx needs to diversity away from reliance upon Covidien being their sugar daddy.