By Jim Shrine

Cephalon Inc. received $14.4 million up front from a potential $40 million collaboration that assigns European rights for preclinical neurological disease candidates to the Danish pharmaceutical company H. Lundbeck A/S.

Lundbeck, of Copenhagen, purchased $12 million in Cephalon stock as part of the deal, which also includes a $2.4 million up-front payment, $12 million in research funding over three years, and potential milestones of $13 million, as well as royalties on sales. The purchase of 1 million shares at $12 each was made at an average market price prior to the deal's close.

Cephalon (NASDAQ:CEPH) closed Tuesday at $13.625, up $0.125. The company reported 28.8 million shares outstanding as of March 31.

The collaboration centers on development of orally active small-molecule receptor tyrosine kinase (RTK) inhibitors to promote neuronal survival, for neurodegenerative diseases such as Alzheimer's and Parkinson's. The lead molecule from the program, CEP-1347, is expected to be taken into the clinic later this year, said Sandra Menta, Cephalon's manager of corporate communications.

"It's important that we are advancing one of our molecules into clinical trials this year," Menta said, "and retaining the U.S. rights. It's very expensive to do a clinical program in chronic neurodegenerative diseases. Fortunately, we have Lundbeck, which is experienced in developing and marketing products for neurological disorders."

Lundbeck will fund development through Phase I trials and the companies will share costs equally after that, Menta said.

Cephalon, of West Chester, Pa., said irreplaceable neuronal loss is the underlying pathology for diseases such as Alzheimer's and Parkinson's, and that loss is influenced by the stress-activated protein kinase pathway. The company's RTK inhibitors are designed to selectively and strongly inhibit the key kinases within that pathway, thereby blocking cell death in neurons. The molecules have enhanced neuronal survival in preclinical models, the company said.

Lundbeck is the third largest drug maker in Denmark, with the antidepressant Celexa its biggest product. Lundbeck gets rights to CEP-1347 and backup molecules in Europe and other territories. Kyowa Hakko Co. Ltd., of Tokyo, has rights to RTK inhibitors in much of the rest of the world.

Kyowa Hakko also is partnered with Cephalon for Myotrophin, a treatment for amyotrophic lateral sclerosis that essentially has been on hold at the FDA. The agency issued an approvable letter for Myotrophin in May 1998 pending additional information. (See BioWorld Today, May 14, 1998, p. 1.)

Menta said Kyowa Hokko is expected to complete a Japanese study of Myotrophin this summer, and data from that trial will be forwarded to the FDA for consideration.

Cephalon launched Provigil in February and it generated sales of about $1.7 million in the first quarter. It is indicated for treating excessive daytime sleepiness associated with narcolepsy, but a significant piece of the company's strategy is getting a broader label for the drug. It is in trials for sleep apnea, fatigue associated with multiple sclerosis, the "sundowning" effects of Alzheimer's disease and daytime sleepiness associated with Parkinson's disease.

"Our main focus has been on Provigil and expanding the market potential," Menta said. "Now, we have an exciting new compound moving into clinical development. It's another direction in our clinical research program."