West Coast Editor

On the heels of the FDA's go-ahead for a Phase III trial with Neurodex for pain from diabetic neuropathy, and a rolling new drug application in progress for pseudobulbar affect, Avanir Pharmaceuticals Inc. has gained more rights to the compound sublicensed from IriSys Inc. in 2000.

"They've not received any money yet" from the licensing deal, said Patrice Saxon, director of investor relations for San Diego-based Avanir, because the deal was largely back-end loaded.

Avanir paid about $1.9 million plus 2 million shares of stock to get the remaining rights from IriSys, also of San Diego, which was co-founded by Avanir's president and CEO, Gerald Yakatan. At Tuesday's closing price of $2.50, the deal would be worth about $6.9 million.

"That's pretty close," Saxon told BioWorld Today, noting that the transaction used a five-day price average, similar to the agreement in the summer of 2001 with San Diego-based Ciblex Corp. to acquire its macrophage migration inhibitory factor technology, terms of which were not disclosed.

Lazard Freres & Co. LLC in New York estimated combined royalties and milestones to IriSys and the Center for Neurologic Study would have been 12 percent to 14 percent of Neurodex sales, and the analyst firm calculated a savings, thanks to the rights buyout, of about $30 million in those costs estimated over the first five years of commercialization.

The IriSys rights acquisition leaves Avanir with exclusive worldwide marketing responsibilities to Neurodex for five indications under a royalty-bearing license with the owner of the underlying technology, the Center for Neurologic Study in San Diego, to which Avanir will pay milestones, a patent royalty on product sales, and a share of revenues received if Neurodex is sub-licensed to a third party. The five indications are pseudobulbar affect (PBA), pain from diabetic neuropathy, chronic cough, dermatitis and weaning drug-dependent patients off narcotics and anti-depressants.

Avanir's shares (NYSE:AVN) closed Wednesday at $2.70, up 20 cents.

Phase III testing of Neurodex for PBA is finished and Avanir started the rolling new drug application in December. If approved, it would be the first therapy for the indication, which is characterized by uncontrollable laughing and crying, and afflicts about 1 million patients with amyotrophic lateral sclerosis, multiple sclerosis, Alzheimer's disease, stroke and traumatic brain injury.

The research firm IMS Health has estimated the market at about $500 million in 2006.

Neurodex is an oral combination of dextromethorphan (DM) - long known to lessen the cough reflex and apparently effective against PBA (it's an active ingredient in Robitussin DM) - with the enzyme inhibitor quinidine sulfate, which sustains elevated levels of DM in the body.

In the middle of this year, the Phase III trials with Neurodex for neuropathic pain will begin under a special protocol assessment from the FDA.

"We've done a lot of the beginning work," Saxon said, and a contract research organization is identifying sites.