BioWorld Today Correspondent

Biotechnology Value Fund (BVF) LP is taking a substantial minority position in Addex Pharmaceuticals Ltd. by investing CHF20 million (US$19.8 million) in the company, in the form of an immediate equity investment of CHF6 million and the purchase of convertible loan notes valued at CHF14 million.

Geneva-based Addex is issuing 593,567 new shares to BVF, and its affiliates, priced at CHF10.18 per share. It also is issuing zero coupon six-month mandatory convertible notes that will convert into 1,371,069 new shares on March 14, 2011. The conversion priced also has been fixed at CHF10.18 per share.

BVF, of San Francisco, will hold a 30 percent stake in Addex once the second leg of the transaction has been completed. "They already had 6.6 percent pre-deal," Chris Maggos, head of investor relations and communications at Addex, told BioWorld Today. The deal will give Addex the benefit of an "active" – as opposed to an "activist" – investor with a strong industry presence and an extensive network, said Chief Financial Officer Tim Dyer. "Having them with 30 percent means they have skin in the game," he added.

"We didn't have to let them take so much – we had cash," Maggos noted. The company exited the second quarter with CHF56.7 million on its balance sheet. The additional funding will "extend the cash runway to give us more time to deliver a number of milestones," Dyer said. The company is now funded to the beginning of 2013 and will be able to take forward several preclinical programs as a result.

BVF paid a premium of 12 percent on the volume-weighted average price of Addex's stock during the five trading days preceding the announcement of the deal. "If anything, on a mathematical basis, this has been anti-dilutive for shareholders," Dyer said. "Addex was trading at cash and has been trading at cash for some time now."

The deal represents significant validation for Addex's allosteric modulation platform. The company suffered a clinical setback and a major mauling on the equity markets last year, when it halted a Phase IIb trial of ADX10059 in migraine prevention because of liver toxicity problems. It also stopped a trial of the same compound, a negative allosteric modulator of the metabotropic glutamate receptor 5 (mGluR5), in gastroesophageal reflux disease.

The rest of its pipeline was, and still is, distinctly early stage. What is now its lead development candidate, ADX48621 (another mGluR5 negative allosteric modulator), will enter two Phase II trials, in levodopa-induced dyskinesia in Parkinson's disease and in dystonia in non-Parkinson's patients, in the coming months. Data should be available by late 2011 or early 2012.

Basel, Switzerland-based Novartis AG is bidding to be the first company to introduce a drug for levodopa-induced dyskinesia. It is planning a regulatory filing during 2012 for its drug candidate, AFQ056, which also inhibits mGluR5 via an allosteric mechanism.

A second Addex compound, ADX71149, which is licensed to Johnson & Johnson, of New Brunswick, N.J., is also expected to enter a Phase II trial shortly. The molecule, a positive allosteric modulator of mGluR2, is in development for schizophrenia and anxiety.

Two further compounds are likely to enter clinical development during 2011. ADX71943, a positive allosteric modulator of GABA-B receptor, is in development for chronic pain. ADX68692, a negative allosteric modulator of follicle stimulating hormone receptor, is in development for endometriosis and benign prostatic hyperplasia.

Two programs, licensed to Whitehouse Station, N.J.-based Merck & Co., are still in preclinical development, in Parkinson's disease and schizophrenia.

The BVF deal "removes the long-term funding concerns" associated with Addex, London-based Edison Investment Research wrote in a research note. "It also provides Addex with negotiating capital that may boost its ability to secure favorable terms in licensing deals."