The UK's biggest pharmaceutical group, GlaxoSmithKline, is to pay up to £1.2bn for the rights to develop and sell almorexant, an anti-insomnia treatment in its final stage of testing.
GSK will initially spend £66m to help the drug's Swiss maker, Actelion, push the sleeping pill through its phase three trials in Europe. Assuming almorexant passes the licencing requirements, Glaxo's will be liable to pay additional sums relating to sales and other applications for the treatment.
A spokesperson for the group said yesterday the deal was unlikely to result in the whole £1.2bn being paid and declined to comment on what other trials were likely for almorexant.
According to analysts at Dresdner Kleinwort, almorexant is expected to be ready for market by 2011. With 80 million sufferers in the United States alone, experts at JP Morgan Cazenove argue that the US market for insomnia treatments is worth up to $1.2bn.
GSK and Actelion have agreed to continue to pool research into insomnia treatments, although at present this does not extend beyond almorexant.
Analysts covering GSK had one eye on the group's interim results, due next week. It will be one of the first chances the group's chief executive, Andrew Witty, has had to talk directly to shareholders who have seen the stock fall steadily over the past 12 months.
Jeremy Batstone-Carr, an analyst at Charles Stanley, reckons that Mr Witty will take the opportunity to outline his strategy, two months into the job.