SAN DIEGO – In almost hushed tones to reporters gathered in a corner room of the San Diego Convention Center at BIO 2014, Bionomics Ltd. CEO Deborah Rathjen unveiled late Monday the firm's second deal in less than a year with Merck & Co. Inc., this time a potential $526 million arrangement focused on a preclinical therapy targeting Alzheimer's disease (AD).

Rathjen provided details of the pact between Adelaide, South Australia-based Bionomics and Merck, of Whitehouse Station, N.J., which is providing $20 million up front and the rest in research and development milestone payments.

The animal studies with BNC375 – a key compound in the program licensed to Merck – have used a "wide-ranging set of models," Rathjen said, calling the preclinical package "pretty robust in that regard" and pointing to 100-fold dose ranging across the animals. Cognitive impairment in Parkinson's disease and other conditions is also covered by the contract terms.

"It's a tricky thing," she acknowledged to BioWorld Today in response to a question, "but we've done a lot of benchmarking, and we've found that comparative compounds really lack this dimension. It's very potent, and as we progress through the dose range, there's a steady building of efficacy with no drop-off at the other side. That fundamentally is a key point for us."

But she couldn't say why that would be so. "I'm not able to say more about the mechanism of action as a result of our arrangement with Merck," Rathjen said. Pressed as to whether the drug candidate takes aim at amyloid plaque – an approach that has not worked particularly well – she pointed out that the approach is described as completely new. "That should give you a big hint," she said.

"Funding for [AD] has been increasing, but still remains somewhat below par, we believe, with respect to other major serious conditions," Rathjen said, and trotted out the dreary figures: One in nine people older than 65 is affected by AD, roughly 5 million people, making it the sixth leading cause of death. By 2015, the post-65 population with AD is expected to increase by 40 percent, bringing the number to about 7 million.

"Obviously we're looking at the medical need first and foremost, but there is a very substantial global market to address here," about $10 billion in the U.S. in 2012, Rathjen said.

BNC375 comes out of Multicore, one of four technology platforms owned by Bionomics, which entered its first agreement with Merck last summer. That deal, for chronic pain including neuropathic pain, gave Merck the option to exclusively license a compound in return for option exercise fees and development and regulatory milestone payments of up to $172 million. Bionomics also may be eligible for undisclosed royalties on net sales of products emerging from the tie-up.

"The next steps [with BNC375] will be elaborated by our partner," Rathjen said.

Bionomics' wholly owned subsidiary in Strasbourg, France, operates 50 percent as a contract research organization. "We find that a pretty interesting way to run our neuroscience programs," since the cash flow from the CRO operations "very significantly offsets our burn" with research projects, which include efforts in oncology.

In May at the American Society of Clinical Oncology meeting, the firm presented phase I data with its ovarian cancer candidate, BNC105, a vascular-disrupting agent studied in combination with gemcitabine-carboplatin in platinum-sensitive ovarian cancer patients in first or second relapse. The encouraging results came from the first portion of a phase I/II experiment.

Two months earlier, phase II data with BNC105 in advanced renal cancer turned up value in patients with advanced disease and identified biomarkers that correlate with progression-free survival at six months. Adding the compound to the mTOR inhibitor Afinitor (everolimus, Novartis AG) delayed disease progression in patient subgroups identified according to metastases, previous nephrectomy and Fuhrman tumor differentiation grade.

The company has no deals yet in cancer, "something we're hoping to right" as Bionomics continues working with academic research institutes, Rathjen said.

Also exploring immune disease, the firm has BNC164, an inhibitor of the Kv1.3 potassium ion channel as a potential new-generation treatment for psoriasis. The compound has shown high selectivity for Kv1.3 over closely related potassium ion channels and the hERG channel, knocking down Kv1.3 with potency proven by in vitro by way of electrophysiology.

Shares of Bionomics (ASX:BNO) closed Tuesday at A53 cents (US50 cents), up A9.5 cents, or 21.8 percent.