ZURICH GlaxoSmithKline Ltd (GSK.L) could pay Swiss company Actelion Ltd ATLN.VX up to 3.3 billion Swiss francs ($3.28 billion) to develop a promising insomnia drug in the largest biotech partnering deal.
Glaxo, Europe's biggest drugmaker, beat many of the world's top pharmaceuticals companies to partner Actelion's sleeping pill almorexant and the deal sent the Swiss biotech's stock soaring nearly 10 percent on Monday.
"The deal terms already allow significant value to be transferred to shareholders," said Landsbanki Kepler analyst Denise Anderson.
Glaxo, which like other big drugmakers is keen to snap up promising new medicines to bolster its pipeline, had been tipped as a likely partner for almorexant, currently in late-stage clinical development.
But some analysts had questioned whether it would go for the deal as it has the only other similar drug in clinical development, on hold in mid-stage trials.
Other potential partners included Actelion's Swiss neighbor Novartis AG NOVN.VX, the world's biggest drugmaker Pfizer Inc (PFE.N), Schering Plough Corp SGP.N and Johnson & Johnson (JNJ.N), bankers and analysts have said.
By 0931 GMT, Actelion shares had dropped back somewhat and were 3.5 percent higher at 54.45 francs. Glaxo shares rose 0.5 percent to 1,197.5 pence.
"Although an announcement of a deal had been expected, the magnitude of the deal and the deal terms had not," Goldman Sachs analyst Stephen McGarry said.
"As we noted previously, this was likely to be -- and now is -- a landscape-changing deal for Actelion and a significant deal for partner GSK. It gives both companies a seven-year lead over the nearest competitor in the insomnia and related indications," McGarry said in a note.
Almorexant is part of a class of drugs known as orexin antagonists which are designed to block receptors for brain chemicals that maintain wakefulness and regulate the sleep-wake cycle.
The drug is a major part of Actelion's strategy to cut its dependence on key drug Tracleer, which treats a rare heart and lung disorder and rakes in more than $1 billion a year.
Kepler's Anderson sees first late-stage results for almorexant in the second half of 2009 and launch in late 2011.
Glaxo will pay 150 million francs upfront, plus milestones, for exclusive global rights to co-develop and co-commercialize almorexant. The deal does not include Japan.
Actelion will continue to lead its development program, with Glaxo meeting 40 percent of the costs, and will be eligible for up to 415 million francs in milestone payments for the drug's development in insomnia.
It could receive up to 2.735 billion francs more, depending on almorexant's progress in other illnesses that have yet to be evaluated in clinical trials.
Costs and profits from the collaboration will be shared between the two companies.
(Editing by Will Waterman and Erica Billingham)