BioWorld International Correspondent

NeuroSearch A/S will bank as much as €32 million (US$45.1 million) in guaranteed funding over the next three years on the strength of a new drug discovery and development alliance in central nervous system disease with Janssen Pharmaceutica NV, a subsidiary of Johnson & Johnson Co., of New Brunswick, N.J.

NeuroSearch is getting €5 million up front, €12 million in research funding over the three-year term of the agreement, plus an equity investment of €10 million, with an option to sell Lilly another €5 million worth of stock by April 30, 2010.

In addition, it could earn up to €213 million in milestone payments for each product that reaches the market, as well as double-digit royalties on sales. The two companies have not revealed how many programs are involved. "There is no maximum number," NeuroSearch vice president of investor relations Hanne Leth Hillman told BioWorld International.

Janssen also has retained an option to extend the alliance for another two years after the initial three-year term of the agreement. NeuroSearch would receive additional funding.

The initial equity component of the deal involves 618,562 new NeuroSearch shares, priced at DKK120.35 (US$22.84) each, which represents a 10-day trailing average for the stock, prior to the agreement being signed. The additional equity option also would be priced according to the prevailing share price.

It's the second large-scale discovery deal Ballerup, Denmark-based NeuroSearch has signed this year. In February, it entered a similar alliance in CNS, focused on ion channel targets, with Eli Lilly and Co., of Indianapolis. That agreement comprised about $30 million in up-front, equity and research funding, plus up to $320 million in milestones for each product. (See BioWorld International, Feb. 18, 2009.)

"The structure [of the Janssen agreement] is very similar to that deal," Hillman said. "The royalty numbers could be a bit better than in the Lilly deal."

Neither Janssen nor NeuroSearch has disclosed details of the targets they are pursuing, but the alliance will focus on NeuroSearch's key area of expertise, which is in finding modulators of ion channels and monoamine transporters. "The targets covered by the alliance have been defined," Hillman said.

As with the Lilly deal, NeuroSearch will be responsible for drug discovery and early development, while Janssen will be able to opt in at various stages, after which it would assume all development and funding obligations.

The deal has been structured to give NeuroSearch the flexibility to maximize its upside from the alliance, Hillman said.

That could include co-development on certain programs. "It all depends on how we are developing," she explained.

Almost all of NeuroSearch's research activity is funded. "We will not be able to start alliances of the same magnitude as the deals with Janssen and Lilly," Hillman said. However, the company could do one or two smaller, more targeted deals, she added.

The research phase of its wide-ranging alliance with London-based GlaxoSmithKline plc is finished. One compound from that program already has entered the clinic. Four more are in preclinical development, and several others are at an earlier stage in the development process.

The company also has two early clinical-stage programs partnered with Abbott, of Abbott Park, Ill.: ABT-894, in development for attention deficit hyperactivity disorder, and ABT-560, in development for cognitive dysfunction.

Its two lead programs are unpartnered. The company aims to commercialize its Huntington's disease therapy pridopidine (ACR16) - a dopaminergic stabilizer - itself. The first of two Phase III trials will read out later this year or early next year.

NeuroSearch is seeking a partner for tesofensine, a triple monoamine reuptake inhibitor, which has completed Phase II trials in obesity.

In June, the company completed an end-of-Phase-II meeting with the FDA, in which it agreed with the agency on a four-study Phase III program. The program will involve a total of 5,700 patients and will include two head-to-head trials against sibutramine, which is marketed by Abbott as Meridia in North America and as Reductil in Europe.

Discussions with potential partners are ongoing, but the company will not allow them to delay the start of the program, which has been penciled in for late 2009 or early 2010.

"We will not sit and wait for a deal," Hillman said. "We can initiate the first of the four studies in the Phase III program."

Shares in NeuroSearch (COPENHAGEN:NEUS) closed at DKK128 (US$24.20) Monday on news of the Janssen deal, up DKK8 or 6.7 percent from the previous close.

Published  August 19, 2009