Merck in $700 million schizophrenia deal

ZURICH (Reuters) - Swiss biotech company Addex Pharmaceuticals SA ADXN.S said it could receive more than $700 million from Merck & Co Inc MRK.N for a licensing deal on its ADX63365 drug to treat schizophrenia, lifting its shares.

The Merck and Company Pharmaceutical and Services building in Duluth, Georgia, July 8, 2002. Swiss biotech company Addex Pharmaceuticals SA could receive more than $700 million from Merck & Co Inc for a licensing deal on its ADX63365 drug for schizophrenia. REUTERS/Tami Chappell

Addex will receive $22 million up front from Merck for the schizophrenia deal -- which also covers other undisclosed indications -- and is eligible for up to $680 million in milestone payments, it said on Thursday.

Geneva-based Addex also said its lead compound ADX10059 had failed to meet its main target in a mid-stage clinical trial in acute anxiety.

Addex shares rose 6.5 percent to 42 Swiss francs by 4:12 a.m. EST, versus a 1 percent drop in the DJ Stoxx European drugs index, as the boost from the Merck deal outweighed the impact of the clinical trial failure, analysts said.

Deals between major drugmakers such as Merck and smaller biotech partners are becoming increasingly common, as big pharma invests in medicines to fill drug pipelines.

Addex, the latest of a series of biotechs to list in Switzerland, is also eligible to receive royalties on sales of any products resulting from the Merck collaboration.

Addex could receive up to $455 million in milestones for the first product developed in two indications, plus a further $225 million for any second product.

“Importantly, beyond the usual royalty structure, which given the stage of development of the drug and recent deals we expect is somewhere between 5-15 percent, Addex has retained co-promote rights in certain EU countries,” PiperJaffray analysts said in a note.

“There is nothing in our models for ADX63365,” they said, reiterating a price target of 87 francs and said they still expected one or two more deals from Addex in 2008.

It is the second partnership agreement between the two firms in a month, after Addex said in December it could receive up to $170.5 million from a collaboration and licensing deal with Merck to develop Parkinson’s disease drugs.

Addex now expects its full-year 2008 cash burn to be about 25-30 million francs ($22.2-$26.6 million).

In a separate statement on Thursday, Addex said ADX10059 did not reduce acute anticipatory anxiety in a Phase IIa study in patients with dental anxiety.

The company will announce further plans in the indication after completing analysis of the data.

Development of ADX10059 in two other indications -- gastroesophageal reflux disease (GERD) and migraine -- was continuing as planned, Addex said.

Editing by Louise Ireland