In its second large deal of the calendar year, Neurocrine Biosciences Inc. acquired the rights to Xenon Pharmaceutical Inc.’s selective sodium channel inhibitor for treating epileptic encephalopathy. Xenon receives $30 million up front, $20 million in equity and up to $1.7 billion in potential development, regulatory and commercial milestone payments.

Neurocrine gains an exclusive license to XEN-901, a clinical-stage selective Nav1.6 sodium channel inhibitor with potential in SCN8A developmental and epileptic encephalopathy (SCN8A-DEE) and other forms of epilepsy, including focal epilepsy. In addition, Neurocrine gains an exclusive license to preclinical compounds for development, including selective Nav1.6 inhibitors and dual Nav1.2/1.6 inhibitors. The agreement also includes a multiyear research collaboration to discover, identify and develop additional novel Nav1.6 and Nav1.2/1.6 inhibitors.

SCN8A epileptic encephalopathy is rare and severe, caused by gene mutations that lead to a gain-of-function in the Nav1.6 sodium channel.

“We think investors will be intrigued by the opportunity especially given the recent revival we are seeing in new method of action epilepsy drugs (GW’s [OP] Epidiolex, Zogenix’s [OP] Fintepla, SK Life Science’s Xcopri),” SVB Leerink analysts wrote Monday. “However, this is an early stage compound, so we wouldn’t expect this deal would impact the stock in any meaningful way just yet. And we chose to wait for additional proof-of-concept data before adding this product to our model.”

Neurocrine’s stock (NASDAQ:NBIX) closed at $116.76, up 15 cents on Monday, while Xenon (NASDAQ:XENE) was up 4% to $12.31.

 “Honestly, this is probably the best time to be in neuroscience that I can imagine,” Kevin Gorman, Neurocrine’s CEO, told BioWorld. “There is so much creativity, so much great science coming forward.”

Neurocrine tracks many different modalities, looking for science that’s starting to mature, such as sodium channel inhibitors.

“We’re familiar with trigger points that takes an idea to a concept,” Kyle Gano, Neurocrine’s chief business development officer, told BioWorld. “Those are points we track across the board. We try to act quickly as we can to be the preferred potential partner.”

A phase I trial was completed using a powder-in-capsule formulation of XEN-901 in healthy adult subjects. The development has yet to be finalized, but Xenon hopes an NDA will be filed by midyear 2020. Xenon will receive up to $25 million upon the FDA’s acceptance of the IND, with 55% in the form of an equity investment in Xenon at a 15% premium to Xenon's 30-day trailing volume-weighted average price at that time.

“It is important to Neurocrine to run the study as a controlled study,” Simon Pimstone, Xenon’s CEO and director, said in Monday morning’s investor call. “There was initial discussion on our part that we would be looking to run an open-label study. I can tell you that Neurocrine certainly has a preference to run this as a placebo-controlled type trial. So that design is being finalized.”

Last January, San Diego’s Neurocrine agreed to pay Voyager Therapeutics Inc. $165 million up front and up to $1.7 billion in milestone payments for rights to develop and commercialize four experimental AAV-based gene therapies, one for Friedreich's ataxia and another for Parkinson's disease.

Others working with sodium channel inhibitors include Boehringer Ingelheim GmbH, of Ingelheim, Germany, which enrolled its first patient in October using BI-1265162, an inhaled epithelial sodium channel inhibitor for treating cystic fibrosis. The phase II trial will test different doses on the impact of lung function vs. placebo when added to standard of care in adults and adolescents.

However, Vertex Pharmaceuticals Inc. is carefully examining its relationship with sodium channel inhibitors. The company paused its development of VX-150 for treating pain as it clarifies its search for more commercially and pharmacologically attractive compounds.

In September, SVB Leerink analysts wrote that Vertex seemed to have more concerns about VX-150’s pharmaceutical properties than its medicinal ones: “It is possible that this means the drug has liabilities in dosing, or in drug-drug interactions or metabolism, rather than direct liabilities in efficacy, safety and tolerability. Our distinct impression from the discussion [with management] is that VX-150 is suboptimal, but if it was the only option, could still be developed despite its limitations.”

However, Vertex’s VX-961, a Nav1.8 inhibitor for pain, was fast-tracked by the FDA and is now in a phase I study in healthy volunteers.