For the second time in as many months, London-based Vernalis plc reached across the ocean for a major deal with a U.S. firm, entering this week an agreement worth up to $400 million with pain-drug specialist Endo Pharmaceuticals Inc. focused on the migraine therapy Frova.

Vernalis' stock (NASDAQ:VNLS) skyrocketed more than 136 percent Thursday, moving up $2.39 to close at $4.14.

Both sides expressed satisfaction in a conference call, and investors are apparently pinning their hopes on Endo's established presence with neurologists and on a potential new indication for Frova, the long-acting triptan compound at the center of the deal.

Frova is labeled for acute migraine in adults - a crowded market, to say the least - but also is being studied as a prophylactic treatment for menstrually associated migraine (MAM), which represents about half of all migraine patients, the companies said.

Since its launch in June 2002, Frova has been "competing with companies that have drugs that are basically better," said Tricia Nagle, analyst for the Waltham, Mass.-based research firm Decision Resources. "It's very smart of them to find this niche for themselves, because that's where they can best these other drugs."

Vernalis, based in Reading, UK, expects to file a supplemental new drug application for MAM after completing the second of two Phase III trials. "None of the other [triptans] has approval for menstrual migraine," Nagle said. "They've done studies, but they've been studies for acute treatment" - an indication in which Frova has failed to shine, because it takes longer to kick in.

"When you're looking at acute treatment, you're looking at two-hour pain relief, and [Frova] doesn't even match up," she said. "At four hours and over time, it looks a lot better, so they're definitely going for the right subpopulation."

Frova, which hit sales of $37.5 million last year, is a selective serotonin receptor agonist that boasts the longest half-life in the triptan class - 26 hours.

The terms call for specialty pharmaceutical firm Endo to pay Vernalis an up-front fee of $30 million, anniversary payments for the first two years at $15 million each year and a $40 million milestone payment upon FDA approval of MAM.

Endo also would pay one-time milestones for achievement of certain defined net sales targets in a year, and the payments would rise based on increasing net sales targets - ranging from a milestone of $10 million on $200 million in net sales to a milestone of $75 million on $1.2 billion in net sales.

If all the targets are reached, the milestones could add up to $255 million. Endo, which will expand its sales force early next year by about one-third to push Frova, also is paying royalties. What's more, Endo is providing a $50 million loan facility that Vernalis will use to pay Dublin, Ireland-based Elan Corp. plc for the rights to Frova, which Vernalis agreed earlier this year to buy back for that amount.

Initial Phase III Data Favorable

"The problem with this drug since it's been launched is that it was one of the very late entrants," Nagle said. "It hasn't been marketed well," she added, pointing to its origins with Elan, a company that "has had some issues - with everything."

Chadds Ford, Pa.-based Endo, which markets pain drugs that include the popular narcotic analgesic Percocet (acetaminophen oxycodone hydrochloride), has made UK-based news before. Early last year, it bought U.S. and Canadian marketing and distribution rights to a pair of products - one Phase III pain drug and one Phase II anesthetic - from SkyePharma plc, of London, as well as options for other research-stage products.

Providing its presence with neurologists is Endo's analgesic patch Lidoderm, with the active ingredient lidocaine for postherpetic neuralgia, an infection that begins with shingles.

Frova's chances against MAM seem good. Data from an initial Phase III study were disclosed last April, showing a highly statistically significant improvement in the number of headache-free patients during the perimenstrual period for both of the studied dose regimens of frovatriptan compared to placebo (p<0.0001). More than half of the patients at the higher-dose regimen were headache-free during their menstrual period.

A long-term, open-label Phase III safety study is under way, with a confirmatory Phase III efficacy trial planned for the second half of this year. If positive, the confirmatory study will be included in the sNDA package along with the already completed and positive Phase III study.

Hard Sell To Third-Party Payers?

The migraine road is strewn with casualties. Chapel Hill, N.C.-based Pozen Inc.'s MT 100, a combination of naproxen sodium and metoclopramide, was turned down by the FDA last month. An earlier Pozen migraine drug, MT 300, also got a not-approvable letter from the agency.

Among others to falter: Salt Lake City-based NPS Pharmaceuticals Inc. and Canadian subsidiary NPS Allelix Corp.'s candidate ALX-0646, a triptan-class serotonin agonist like Frova, which was licensed to Forest Laboratories Inc., of New York, in 2000 for development and distribution. By July of last year, the pair resolved a legal fight over termination of their pact, and NPS said it was pursuing the compound for indications other than migraine.

In 1999, just as Phase III trials were slated to begin, Indianapolis-based Eli Lilly and Co. broke off its deal with Synaptic Pharmaceutical Corp., of Paramus, N.J., for development of the serotonin agonist LY334370. Lilly didn't like what it found when reviewing animal toxicity data.

Plenty of other triptans have made it to market, though, the first being sumatriptan, sold as Imitrex by London-based GlaxoSmithKline plc, which was approved in 1993 and since has been followed by a half-dozen others. Imitrex sales hit $900 million last year.

"Imitrex has been the leader for years," Nagle said, noting that Frova also is up against drugs from the likes of London-based AstraZeneca plc and New York-based Pfizer Inc.

"There's really not much to differentiate them," she said. GSK even has a somewhat longer-lasting drug, Amerge (naratriptan), which was approved in 1998, but the firm is unlikely to start trying to market Amerge for MAM, Nagle said. Amerge has a six-hour half-life.

For Frova, MAM could be the key, Nagle said - but then, maybe not.

"Most women are either worse or more frequent around their period, but that doesn't necessarily mean it's a market that this drug will be better than any other drug," she said. "They're all effective and they all can be used for headaches no matter what time of the month you have them."

Another potential hitch is reimbursement.

"To use [a triptan] for up to two weeks during a menstrual cycle could be very expensive," she said, noting that MAM typically is treated by general practitioners who recommend ibuprofen and use triptans for breakthrough headaches.

"This is going to be a hard sell to HMOs, and third-party payers probably are not going to cover it in the U.S.," Nagle said.

Last month, Vernalis signed a potential $100 million deal with Cambridge, Mass.-based Biogen Idec Inc. for the former's Parkinson's disease program, still at the Phase I stage. Biogen is paying an initial license fee of $10 million and investing $6 million in Vernalis, pledging to invest another $4 million in any future Vernalis fund raising. Due to the funds associated with the Endo deal, Vernalis no longer needs to conduct a rights issue.

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