BioWorld International Correspondent

NeuroSearch A/S and GlaxoSmithKline plc restructured an existing alliance in order to modify the risk-reward profile of their relationship and to broaden its scope.

The new agreement also provides for a future purchase of additional NeuroSearch stock by GSK, of London, which already holds a stake of more than 7 percent in the Ballerup, Denmark-based company.

The existing five-year agreement, signed in December 2003, covered multiple programs based on NeuroSearch's discovery platform for finding novel ion channel modulators for major central nervous system (CNS) conditions. It also included one clinical-stage compound, NS2359, which was in development for attention deficit hyperactivity disorder at the time (ADHD). (See BioWorld International, Dec. 24, 2003.)

That compound now is entering a large-scale international Phase II trial in depression, which will recruit several hundred participants. Recruitment is under way, NeuroSearch CEO Flemming Pedersen told BioWorld International, and the first patient is expected to be dosed before year-end. The ADHD development program has been parked, but it also remains part of GSK's project portfolio, he said.

Meanwhile, the first novel compound discovered under the alliance is nearing the clinic. The molecule, designated NSD-644, has potential application in depression, neuropathic pain and in other CNS conditions. London-based GSK retains an option on the compound, although it has yet to take it into its development portfolio.

NeuroSearch already has secured about €100 million (US$128.3 million) from the existing alliance, Pedersen said. That includes an up-front payment, research fees and a stock sale to GSK. NeuroSearch also stood to gain milestones totaling €98.5 million for the successful development of NS2359 and milestones ranging from €32.7 million to €90 million for additional compounds, depending on the development stage at which GSK took them on.

Under the altered agreement, NeuroSearch will assume greater development responsibilities and a higher portion of the early stage costs. It will take compounds from discovery and preclinical development through early stage development. GSK will be entitled to take on molecules that have completed Phase IIa studies. It will pay NeuroSearch milestones totaling €109 million on those that are commercialized, as well as enhanced, double-digit royalties on sales. The milestones would kick in from the start of Phase I studies.

"We have all along been wanting to have a change in the risk-reward structure and to have a bigger slice of the pie," Pedersen said. When the original deal was struck, the company did not have the resources to carry the additional costs, he said. Following the completion of a recent rights issue, which raised gross proceeds of DKK397.1 million (US$68.3 million), the company held around DKK600 million in cash.

The deal also will widen the therapeutic possibilities of the compounds that NeuroSearch's discovery engine is generating. On the GSK side, management of the relationship has been transferred from its CNS unit to its Centre of Excellence for External Drug Discovery, a unit created last year to take charge of its relationships with biotechnology companies, small- and mid-sized pharmaceutical firms and academic institutions. Outside of the GSK alliance, NeuroSearch already has widened its range beyond the CNS field, to obesity and cancer. There now is a better opportunity for other units within GSK to take an interest in its discovery activities, Pedersen said.

Under the revamped agreement, NeuroSearch has an option to sell GSK up to €30 million in stock at market prices, once six investigational new drug applications have been filed.

"If we are pushing molecules forward, that would imply extra cost on our side," Pedersen said. "It's a nice commitment from GSK to have in the overall agreement," he added. However, NeuroSearch would probably only invoke the clause as part of a larger fund-raising exercise, he said.

Investors reacted positively to the news, pushing the company's closing share price up to DKK205.50 on the Copenhagen Stock Exchange Nov. 15, a gain of 16 percent on the previous day's close of DKK177.

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