Two biotechs, Neurocrine Biosciences and Xenon, have announced a licence and collaboration agreement to develop first-in-class treatments for epilepsy in a deal worth up to $1.75 billion.

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Epilepsy is one area of neurology where pharma is having limited success – GW Pharma’s cannabis-based Epidiolex for rare forms of childhood epilepsy is approved in both the US and EU, at a time when there is almost no progress with degenerative neurological diseases such as Alzheimer’s and Parkinson’s.

Under the agreement San Diego-based Neurocrine will acquire rights to XEN901, the first selective sodium channel inhibitor entering phase 2 studies for epileptic encephalopathy, also known as SCN8A-EE.

British Columbia-based Xenon will receive $50 million up front and up to $1.7 billion in development, regulatory, and commercial milestone payments across all licensed uses, and an option to co-fund XEN901.

Neurocrine’s exclusive licence covers development of XEN901 for SCN8A developmental and epileptic encephalopathy and other forms of epilepsy, including focal epilepsy.

The California biotech also gains an exclusive license to pre-clinical compounds for development, including selective Nav1.6 inhibitors and dual Nav1.2/1.6 inhibitors.

The agreement also includes a multi-year research collaboration to discover, identify and develop additional novel Nav1.6 and Nav1.2/1.6 inhibitors.

The upfront licence payment includes $30 million in cash and a $20 million equity investment by Neurocrine at a share price of $14.196.

Xenon will receive up to $25 million if the FDA accepts a filing for certain clinical trials for XEN901, with 55% of the amount in the form of an equity investment in Xenon at a 15% premium to Xenon’s average 30-day trading price at that time.

Neurocrine expects to apply to the FDA in the middle of 2020 to start a proposed clinical trial for XEN901 in SCN8A-DEE patients.

Along with the milestone payments already noted, Xenon will receive tiered royalties from XEN901 ranging from the low double-digits to mid-teen percentage in the US and a tiered royalty at slightly lower rates outside the US based upon aggregate global net sales.

Xenon retains an option to co-fund 50% of the US development costs of XEN901 or another product candidate in exchange for increased US royalties, reaching 20% of US net sales at the highest royalty tier for XEN901.

Unless Xenon takes the co-funding option, Neurocrine will fund all clinical development costs associated with the development of product candidates and will also fund a research collaboration for up to three years.

Neurocrine and Xenon agree $1.75bn epilepsy R&D tie-up

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