BioWorld Today Correspondent

Antibiotic developer Novexel SA ended its five-year run as an independent company and returned to the big pharma fold by agreeing to a cash acquisition with AstraZeneca plc, which is valued at up to $505 million.

In a complex three-company deal, London-based AstraZeneca is acquiring Novexel for an initial $350 million, with another $75 million available in undisclosed development milestones. In addition, it will pay Novexel's shareholders a sum equivalent to the company's cash balance at closing, which is expected to be about $80 million.

At the same time, Forest Laboratories Inc., which has owned a piece of Novexel's broad-spectrum beta lactamase inhibitor NXL104, immediately announced that it has acquired broader rights to the compound from AstraZeneca, and will pay Novexel - when it is an AstraZeneca property - $210 million for those rights.

For Novexel's venture capital investors, which include Atlas Venture, Edmond de Rothschild Investment Partners, Sofinnova, Abingworth, 3i plc, Novo, Goldman Sachs, NeoMed and Tokyo-based NIF SMBC, the buyout by AstraZeneca represents a handy exit.

"Our cash balance isn't very far from what we raised in venture capital," Novexel Chief Financial Officer Gordon Waldron told BioWorld Today.

The company, which was formed as a spinout from Sanofi-Aventis Group, also of Paris, on Dec. 1, 2004, secured €90 million (US$129 million) over two venture capital rounds. However, it only drew down €70 million of that total, and also received €75 million in an up-front payment from New York-based Forest Laboratories, Inc., arising out of a licensing deal involving its broad-spectrum beta lactamase inhibitor NXL104. (See BioWorld Today, Jan. 23, 2008.)

Even while analysts and others were contemplating the Novexel-AstraZeneca deal, Forest Laboratories announced it has significantly expanded its overall interests in NXL 104, acquiring full worldwide rights to a ceftaroline/NXL 104 combination while simultaneously licensing rights outside the U.S. Canada and Japan to AstraZeneca. Forest also will receive royalties on AstraZeneca's international sales of the ceftaroline/NXL 104 combination.

The transaction eliminates all future milestone payments Forest could have had to make (totaling €75 million, it said) and royalty payments of approximately 10 percent on sales of ceftaroline/NXL 104, which Forest would have owed Novexel under the original license.

In addition, Forest gains co-development and full commercialization rights in the U.S. and Canada to the ceftazidime/NXL 104 combination being developed by Novexel. In addition, Forest receives commercialization rights to any other combinations involving NXL 104.

New York-based Forest and AstraZeneca agreed that following completion of the Novexel acquisition, Forest will pay Novexel, when it is an AstraZeneca group company, $210 million for the additional rights to NXL 104, which represents approximately 50 percent of AstraZeneca's acquisition and related transaction costs.

Forest also may be obligated to pay other costs and half of some future development milestone payments in connection with the transaction. Forest said it will share with AstraZeneca the costs of worldwide development of the ceftaroline and ceftazidime combinations with NXL 104. The transaction is expected to close in Forest's fiscal fourth quarter.

Anders Ekblom, AstraZeneca executive vice president of development, said the "innovative structure of this agreement allows us to build on our existing collaboration with Forest to create value, share costs and reduce exposure to risk while developing two novel antibiotic combinations that address a growing problem for clinicians and patients." NXL 104 combinations, he added, have the potential to "outwit bacteria that would otherwise be resistant to antibiotics."

Novexel has been developing NXL104 in combination with ceftazidime for treating severe hospital infections caused by antibiotic-resistant Gram-negative pathogens. Phase II trials are under way in two indications, complicated intra-abdominal infections and complicated urinary tract infections. "We kept the worldwide rights, and we didn't amputate any value," Waldron said.

A second compound, NXL103, an oral streptogramin antibiotic, began a second Phase II trial in adults with acute bacterial skin and skin structure infections last month. It has already completed a trial in community-acquired pneumonia. Two more programs are in preclinical development, NXL105, an anti-pseudomonal antibiotic, and NXL201, an echinocandin antifungal agent.

Novexel's decision to exit now is linked to the company's pipeline progress, since it would soon need to secure enough funds to move into Phase III trials. "It was out of our scope unless we did an IPO," Waldron said. That kind of transaction was not in the cards. "To wait for an IPO would have delayed the programs," he said.

The AstraZeneca offer was not the first the company received. "We never entertained them in the past. We felt there was more value in waiting - and this proved to be true," Waldron said. The deal was a tribute to the company's entire work force, he said. "There were 55 people who worked for five years to get to this."