Washington Editor

An exclusive out-licensing deal could be worth up to $475 million to Neuromed Pharmaceuticals Ltd., which entered an agreement with Merck & Co. Inc. on N-type calcium channel blockers for pain and other neurological disorders.

"This is a transformative event for Neuromed," said its president and CEO, Christopher Gallen, noting that he believes the deal eclipses any previous licensing arrangements executed by Canadian firms. "Our lead program is going to be fully resourced," he added.

The agreement comes within weeks of a $25 million private financing round for Neuromed, which was spun out of the University of British Columbia eight years ago and now has offices in Vancouver and Conshohocken, Pa. Upon raising that capital, Gallen noted that the company was continuing to seek a partnership on its N-type calcium channel program. (See BioWorld Today, March 9, 2006.)

"We think this platform has the potential to be huge," he told BioWorld Today, adding that drugs emerging from the class could end up commanding a share of the estimated $30 billion pain drug market comparable to triptans or SSRIs. Neuromed drew interest from about a dozen large pharmaceutical firms looking at partnering the N-type calcium channel blockers, and the company eventually narrowed the field to three that offered similar valuations for the program.

The arrangement gives Merck a worldwide license to research, develop and commercialize NMED-160, Neuromed’s lead compound in Phase II for pain, and other compounds that selectively target the N-type calcium channel. In exchange, Merck will make a $25 million initial cash payment to Neuromed, which also is due research funding for two years as part of the collaborative research program, and there is an option to renew the deal for an extra two years.

NMED-160 will move into further Phase II development "over the next couple of years," Gallen said, to optimize its formulation, determine its peak dose and better characterize its ability to target inflammatory pain, such as osteoarthritis or neuropathic pain like diabetic neuropathy. In both of those areas, he added, NMED-160 appears to be as potent as morphine but without its side effects. "It hits on the central modulation and integration point in the pain cascade," Gallen said, noting that the compound seems best suited for use in chronic pain.

The deal complements pain-focused internal research at Merck, of Whitehouse Station, N.J., which is responsible for all development costs and activities. Gallen said Neuromed’s lead over other companies trying to develop similar drugs "was the real driver in the commercial value of this."

The big money would come down the road, as success in launching NMED-160 for an initial single indication on a worldwide basis would trigger milestone payments totaling $202 million. Those payments could increase to about $450 million if a further indication for NMED-160 is developed and approved, and another compound is developed and approved for two indications. Additional milestone payments would be applicable should more compounds be developed.

That additional focus on follow-up N-type calcium channel blockers set Merck apart from other potential partners in Gallen’s eyes. "Also important was Merck’s preclinical science in ion channels," he said, so Neuromed will essentially loan about two dozen employees to Merck over the next couple of years to develop "great second- and third-generation compounds."

Neuromed, which retains an option to co-promote resulting compounds to U.S.-based specialist physicians, would receive royalties on worldwide sales of NMED-160 and any additional compounds developed. Also, the company also may retain rights to develop certain compounds for indications other than pain.

The option to begin building an internal sales force at Neuromed is appealing to the company’s overall growth. Going forward, Gallen said its focus would begin to shift toward its other primary area of research, T-type calcium channel blockers. With preclinical success in models of epilepsy and hypertension, Neuromed will steer funds from its Series D financing from earlier this month and its up-front payment "to carry that program forward as rapidly as possible." Lead optimization is ongoing, and the company hopes to begin early clinical studies by the end of next year.

"If N-type calcium channel blockers are our first act," Gallen said, "the T-type blockers are the second act for Neuromed."

The company has raised about $74 million in equity funding since its 1998 inception.