Having rung the bell in phase II last summer, Ovid Therapeutics Inc. and Takeda Pharmaceutical Co. Ltd. signed a pact giving the latter global rights to develop and commercialize soticlestat, a first-in-class inhibitor of cholesterol 24-hydroxylase for the treatment of developmental and epileptic encephalopathies including Dravet syndrome (DS) and Lennox-Gastaut syndrome (LGS).

New York-based Ovid could bank as much as $856 million in payments, including $196 million up front, followed by regulatory and commercial milestone rewards plus tiered double-digit royalties. The original 2017 collaboration between Ovid and Takeda, of Osaka, Japan, is concluding. Ovid bears no further development or milestone obligations. Takeda plans to start phase III studies in children and adults with DS and LGS in the second quarter of this year. Shares of Ovid (NASDAQ:OVID) closed at $4.04, up $1.08, or 36%.

“It’s not just an infusion of capital,” CEO Jeremy Levin pointed out during a conference call with investors. “It’s a reduction in expense” of about $250 million before the drug reaches commercialization. “With that in mind, we have very disciplined approaches to how we will build a platform and augment the pipeline. Hold fire on that. We’ll be prepared to discuss this further. One thing you should be very clear on. We are extremely disciplined and thoughtful and strategic about this – advancing our programs, building our pipeline, and making jolly sure that what we do is what we’re really good at.”

Almost inevitably, last December’s failure with GABAA receptor agonist OV-101 in Angelman syndrome (AS) came up on the call. Early phase III results showed no difference between the drug and placebo. Also known as gaboxadol, OV-101 was the furthest along in the small field of medicines in development for AS, a rare genetic condition that usually first appears in early childhood, results from a loss of function in a gene called UBE3A and severely affects the brain. In the U.S., the condition affects at least 23,000 families. Symptoms typically include delayed development, intellectual disability, severe speech impairment, and problems with movement and balance, according to the U.S. NIH. Most children with AS have epilepsy and microcephaly.

On the subject of AS, Levin took the long view. “Since we got into this business of [rare neurological diseases], it’s exploded,” he said. Pursuing AS in 2014, “there was only Ovid, and we’ve learned a hell of a lot about what goes on in that disorder, and what that has implications for [in] autism, or other types of disorders that like that.” The same span of time saw “a fundamental shift in the technology base of being able to address the disorders themselves,” so that now “upwards of 14” companies have candidates in AS. “That’s not dissimilar to many other areas” in the therapeutic space, he said. Ovid has focused on “very carefully defining what is a measurable endpoint,” after the “hard and disappointing” lesson in AS, and the company’s findings are “being promulgated across all companies” interested in the disease.

Amit Rakhit, chief medical officer, said Ovid has not given up on AS. “We’ll have a further update on that as soon as we can see the Elara data [this year], and anticipate an interaction with the FDA to see if there’s a path forward.” A phase II open-label extension study, Elara is designed to evaluate the long-term (52 weeks) safety of OV-101 in subjects with AS and provide additional treatment with the drug for subjects involved in earlier work. Also in the pipeline is OV-329, a GABA aminotransferase inhibitor for the treatment of seizures associated with tuberous sclerosis complex and infantile spasms. Ovid is exploring the biology as well as manufacturing. “Everything looks to be so far on track,” with an IND filing expected in the first half of next year. Further back is OV-882 for AS, a short hairpin RNA therapy.

Another firm making headlines in AS is Novato, Calif.-based Ultragenyx Pharmaceutical Inc., with its antisense oligonucleotide GTX-012 on clinical hold because lower-extremity weakness was reported in all five patients dosed. With partner Genetx Therapeutics LLC, of Downers Grove, Ill., the company is “making progress to lift the hold; the goal is to resume phase I/II in the first half of this year and provide an update in the second half of this year,” SVB Leerink analyst Joseph Schwartz said in a Feb. 24 report. Data thus far have shown improvements in communication and behavior.

William Blair analyst Tim Lugo wanted to know if Ovid has shifted its dealmaking interests to academic settings or continues to investigate “assets that might be buried within a large pharma.” Levin said such decisions depend on the asset. “We’re not interested in revisiting compounds that have either been put aside or used elsewhere, in some other disorder,” but novel candidates and platforms. “We want to break open this field. That is what we’re going to do,” he said.

RBC analyst Brian Abrahams said in a report that the Takeda deal “represents a significant win, accelerating the monetization of this underappreciated asset to finally enable better reflection of its value in shares. With today's substantial stock upside and fewer additional value-inflecting catalysts in the near term, we would expect range-bound [trading] near term,” so he downgraded the stock from outperform to sector perform.