By Matthew Willett

Axonyx Inc. agreed to license worldwide rights to two potential Alzheimer's disease therapeutics to the Ares-Serono Group, cementing a license agreement kept under option since May.

The deal calls for Geneva, Switzerland-based Serono to make a $1.5 million up-front payment to New York-based Axonyx in addition to milestones and royalty payments that could increase the deal's value to more than $21 million.

Michael Strage, Axonyx chief administrative officer and vice president of business development, said the deal includes milestone payments for Axonyx of $1 million upon initiation of clinical trials, $2 million upon initiation of a Phase III pivotal trial, $4 million upon submission of a new drug application (NDA) and $7 million upon an NDA's approval.

"They exercised their option and turned what was basically a research and development deal into a full-blown license agreement," Strage said. "Under that agreement we'll get a signing bonus of $1.5 million and the typical battery of milestone payments."

Royalties included in the deal for Axonyx's preclinical amyloid inhibitor are 6 percent of sales for Axonyx for sales under $150 million and 6.5 percent for sales above that figure.

And that revenue might come sooner than expected, Strage said. Though reluctant to speak on Serono's behalf concerning the research timeline, he expressed optimism.

"We would be happy if there was an investigational new drug application filed before the end of 2001," Strage said.

The deal also includes an option to technology resulting from research into the peptides covered in the license, peptides that show in vivo and in vitro promise to break up the amyloid plaque that characterizes Alzheimer's disease.

"What we're looking at in the Alzheimer's field right now are a couple of drugs on the market that are primarily [treatments of Alzheimer's disease symptoms]. They try to keep neurotransmitter levels from sinking, but the amyloid inhibitor is very different," Strage said. "What we've been able to do, and other companies have adopted this, is to take the idea that amyloid plaque isn't a byproduct, but one of the causes, and we're hoping that a peptide that breaks up amyloid deposits in a test tube and in animal models will work in humans. We may be able to crack up the plaque and give preventative and symptomatic relief of the disease."

The other peptide included in the deal, a prion inhibitor, shows promise in preclinical work for treatment of both bovine spongiform encephalopathy, known as mad cow disease, and its human form, Creutzfeld-Jacob disease.

And a further possibility in Axonyx's Alzheimer's pipeline is pheneserine, an acetylcholinesterase inhibitor that could have preventive use in Alzheimer's treatment by inhibiting the formation of amyloid plaque's constituent molecules.

"It also seems to have an effect on amyloid deposit from a different route, preventing the fragment of the molecules that creates the amyloid from separating out."

With more than 5 million sufferers in the U.S. alone, Strage said, the market for a therapeutic developed from the licensed technology is tremendous. He said Axonyx is betting the eventual treatment for Alzheimer's will mirror the cocktails currently used in AIDS treatment, and said his company could realize revenue from more than one of those drugs.

"We can see certain targets and attack them, and we want to cover as many bases as possible," he said.