Assistant Managing Editor

The licensing deal that spurred a hostile takeover attempt by disgruntled shareholders at Cypress Bioscience Inc. – and eventually led to this year's buyout of the San Diego-based firm by Ramius LLC and Royalty Partners – has come to an end.

Despite assurances earlier this year from Cypress' new parent firm, the company handed back North American rights to midstage schizophrenia candidate BL-1020 to developer BioLineRx Ltd.

The news came while Jerusalem-based BioLineRx has a pending initial public offering (IPO), aimed at adding a Nasdaq listing to its current listing on the Tel Aviv Stock Exchange.

BioLineRx's decision to file for the IPO, which seeks to raise $40.25 million to fund pipeline programs, likely was helped by the promising Cypress deal, which called for a $30 million up-front payment, plus up to $335 million in milestones. Some, however, wondered at the time why BioLineRx opted for a deal with a midsize biotech rather than a big pharma, given the large-market opportunity in antipsychotics, and worried that, perhaps, big pharma wasn't interested. (See BioWorld Today, June 22, 2010, and Sept. 28, 2010.)

Shareholders of Cypress were equally surprised by the deal. The company's stock sank 38 percent the day the BL-1020 in-licensing was disclosed. A month later, Ramius, then a 9.9 percent shareholder, sought a hostile buyout of Cypress, citing the company's risky dealmaking strategy, namely its "ill-conceived" transaction for BL-1020. (See BioWorld Today, July 20, 2010.)

Cypress' board responded by inking two more licensing deals for early stage central nervous system assets, picking up Staccato nicotine drug delivery technology from Mountain View, Calif.-based Alexza Pharmaceuticals Inc. and rights to Phase I autism candidate carbetocin from Marina Biotech Inc., of Bothell Wash. (See BioWorld Today, Aug. 27, 2010.)

By late last year, Cypress had reached an acquisition agreement with Ramius and New York-based Royalty Pharma that valued Cypress at $6.50 per share. But before then, it made several drastic restructuring moves, including cutting its work force by 86 percent and dropping its co-promotion deal with Forest Laboratories Inc., of New York, for fibromyalgia drug Savella (milnacipran), though it retains rights to royalties. Cypress also divested its diagnostics business in exchange for $8 million up front, plus milestones and royalty percentage. (See BioWorld Today, Dec. 16, 2010.)

At the time of the acquisition, BioLineRx's drug remained part of Cypress' CNS pipeline. Cypress reaffirmed its commitment to the drug in January and as recently as late March, during its 2010 earnings call, BioLineRx still believed the development of BL-1020 would progress as planned, including preparations for an upcoming Phase IIb study.

According to BioLineRx, about $10 million had been invested in that study by Cypress, and the small biotech anticipates moving forward with the trial on schedule, with patient recruitment starting next month.

BioLineRx estimated needing about $10 million to $12 million to complete the study. As of Dec. 31, the firm had about NIS139.8 million (US$40 million) in cash and short-term investments. But it does intend to "seek, in the near term, additional funding sources to cover the remaining cost of the trial, in a manner that will not delay the start," CEO Kinneret Savitsky said in a statement.

BioLineRx does not anticipate significant changes to its overall operating plan.

The company said it will attempt to re-partner the program at a more advanced stage of development.

BL-1020 is a GABA-enhanced antipsychotic designed to combine dopamine antagonism with GABA agonist activity. Its claim to differentiation among the crowded antipsychotic space is its early evidence in improving cognition. Results of a previous Phase IIb study showed that the drug statistically significantly hit its cognition endpoint, measured using the Brief Assessment of Cognition in Schizophrenia (BACS) test, and data showed that BL-1020 was superior to both risperidone and placebo on total BACS score (p = 0.027).

Should BioLineRx successfully develop BL-1020, it agreed to pay Cypress a 1 percent royalty on worldwide net sales up to an aggregate cumulative royalty of $80 million, as a condition of the termination. And if the firm re-partners the program, it will owe Cypress 10 percent of all future one-time payments, up to $10 million.

Shares of BioLineRx (TASE:BLRX) closed Thursday at NIS2.03 (US$0.58).