Biotie Therapies Oyj has closed the door on its proposed stock-based acquisition of Newron Pharmaceuticals SpA, following Merck Serono SA's surprise decision to exit a partnership with Newron on the Parkinson's drug safinamide.

Merck Serono, a division of Darmstadt, Germany-based Merck KGaA dropped a bomb on the acquisition process last week by indicating it would hand back rights to Safinamide, which is undergoing separate Phase III trials as an adjunct to dopamine agonist therapy in early stage Parkinson's and as an adjunct to levodopa therapy in mid-to-late-stage Parkinson's, next April. (See BioWorld Today, Oct. 24, 2011.)

"The deal economics changed completely," Timo Veromaa, CEO of Turku, Finland-based Biotie told BioWorld Today. "Now there's going to be significant new investment needed or a partner to be found, and significant costs will be incurred."

Newron CEO Luca Benatti had a similar analysis.

"The return of rights from Merck Serono completely changed the context of the discussions we were having with Biotie," he told BioWorld Today. "Their priority was not to enter a deal where they had to expand the R&D activity, because their cash position was not huge."

Under the original 2006 agreement between Milan, Italy-based Newron and Merck Serono (then Serono SA), upward of $180 million in milestones were on the table. For Biotie, safinamide was the main driver of the Newron deal, which was initially valued at €37.4 million (US$53 million), with another €7.2 million available in stock-based milestones linked to the submission of regulatory filings for safinamide.

Although Biotie is now unwilling to pursue the acquisition "with these terms on the table," Veromaa could be open to renegotiating the terms.

"It is not ruled out but, of course, now Newron has to think about whatever options they may have," he said. At this point, it is not yet clear what is going to happen. "I think we have to let the dust settle, and then see what the next steps are."

For Newron, revisiting the deal with Biotie "seems unlikely at this stage," Benatti said. "The door is not closed on our side, but now the situation is different, and we are assessing whether we consider that as a valuable option for us."

With the imminent return of an unencumbered late-stage asset, the options for Newron are much wider than they were when it entered the acquisition agreement with Biotie. When it began looking for a buyer originally, many firms were not interested in acquiring a royalty stream, Benatti said. "Now that situation has completely changed. I'm expecting the scenarios in front of us are [going to be] much more interesting."

Interest on the part of prospective partners has already been sparked by news of Merck Serono's intention to exit.

"In the last couple of days we've had unsolicited calls from pharmaceutical companies interested in safinamide," he said. Merck Serono will continue to fund the program up to next April, meaning that Newron is not in any immediate hurry to find an alternative deal.

"We have a certain window to find the best option for our shareholders." The company has engaged JSB-Partners LP, of Waltham, Mass., to assist in that process.

Biotie will walk away from the deal €1.5 million to the good, having been able to invoke a 'material adverse effect' clause as a result of Merck Serono's departure. There was a similar clause in place had Copenhagen, Denmark-based H. Lundbeck A/S, Biotie's partner on its alcohol dependency drug nalmefene, exited their alliance. "Unfortunately we were the ones hit on that," Benatti said.

Newron's shares (ZURICH:NWRN) fell 14 percent to close Friday at CHF3.58 (US$4.15). Biotie's stock (HELSINKI:BTH1V) ended the day up 2 percent, to €0.50.

Biotie has been pursuing a growth-through-acquisition strategy, having acquired Basel, Switzerland-based Synosia Therapeutics Holding AG in a stock-based deal valued at €93.6 million in January.

The company is in no immediate hurry to find an alternative to Newron. "We are busy as it is. This would have been a good strong addition, but not with the terms that were originally negotiated," Veromaa said. Nalmefene is on track for a European filing by year-end.