- For the second time this year, Neurocrine Biosciences has expanded its pipeline via a licensing deal, announcing Monday it will buy the rights to a clinical-stage drug the companies hope could become the first approved treatment for a rare type of pediatric epilepsy.
- Neurocrine will pay $30 million in cash and up to $1.7 billion in potential milestone payments to Xenon Pharmaceuticals, a small biotech located just outside of Vancouver. In return, Neurocrine gains an exclusive license to the company's experimental therapy XEN901 as well as a number of preclinical assets.
- Xenon develops medicines for rare neurological disorders. Its deal with Neurocrine focuses on compounds that inhibit a sodium channel called Nav1.6. Neurocrine plans to begin testing XEN901 in children with the rare epilepsy condition after filing an Investigational New Drug application in mid-2020.
Neurocrine found commercial success in 2019 with its tardive dyskinesia treatment Ingrezza (valbenazine), sales of which exceeded $500 million through the first nine months of the year, up 84% from the same period a year ago.
While the market has rewarded that execution — sending Neurocrine shares up nearly 70% this year — the question now is what comes next for the San Diego-based biotech.
So far this year, the biotech's answer has come in the form of two R&D deals designed to expand its pipeline.
In January, Neurocrine paid $165 million upfront to Voyager Therapeutics for four gene therapy programs, including one in Phase 2 testing for Parkinson's disease. The company now adds an epilepsy focus through the Xenon deal.
That deal's lead drug candidate, XEN901, has already completed a Phase 1 trial in healthy adults. The companies said they will prioritize development in a type of childhood epilepsy called SCN8A developmental and epileptic encephalopathy, or SCN8A-DEE.
This rare neurological disorder is caused by a mutation in the SCN8A gene, which encodes instructions for making a part of the sodium channel Nav1.6.
Stifel analyst Paul Matteis said the SCN8A-DEE indication carries "a very strong development rationale" for Xenon's drug, writing in a Monday note to investors that he sees the deal as positive for both companies.
Matteis also highlighted the company's plans to study XEN901 in adult focal epilepsy — a "much more prevalent" population. The National Institutes of Health estimates there are less than 200 people with SCN8A-related epilepsy with encephalopathy.
The R&D deal also gives Neurocrine licenses to three other preclinical candidates. Xenon has the option to gain higher royalties by co-funding U.S. development costs for the one of the products.
As part of the agreement, Neurocrine will also make a $20 million equity investment in Xenon, buying stock at a per share price of just over $14.
Xenon's stock opened up 12% Monday morning, while Neurocrine shares traded flat.