Vernalis, the former British Biotech, has licensed its innovative new Parkinson's disease pill to a US company for up to $100m (£55m) - one of the biggest deals in the biotech sector this year.
Biogen Idec, the US biotechnology giant, is paying an initial $10m for the drug and paid a further $6m for new Vernalis shares, staving off a cash crisis at the historic UK company.
Vernalis has completed just one set of trials of the Parkinson's drug, codenamed V2006, but it shows promising results in stimulating the production of dopamine, the chemical in the brain whose loss leads to Parkinson's.
Simon Sturge, the chief executive, said the deal transferred the costs of future trials over to Biogen, although Vernalis keeps an option to co-market V2006 if the company has created a salesforce by the time the drug reaches the market, towards the end of the decade.
He said: "We don't have to now make the investment in the clinical development but, in the event it is successful, we can then participate in the marketing of it. We have also agreed double-digit percentage royalties. These are exceptional deal terms for something that is so early in development."
Vernalis shares leapt 16 per cent to 55.5p. They had previously fallen to within pennies of a record low because the company said in March that it was planning a rights issue.
It needs extra cash to pay for the acquisition of marketing rights to its only launched product, the migraine pill Frova, and for further trials of the drug. Ireland's Elan had originally bought the rights to Frova but sales had proved disappointing and Vernalis bought Elan out of the deal for $50m. The first $20m payment is due by the end of the year.
Mr Sturge said Vernalis was already in detailed discussions with several drug firms over re-licensing Frova.
Jonathon Senior, an analyst at Evolution Beeson Gregory, said: "While the $16m will not cover the entire cost of Frova, it does provide Vernalis some flexibility in terms of the nature and the timing of a fund raising. In addition, it strengthens the company's position in negotiations with other businesses concerning the relicensing of the Frova rights."
Biogen has agreed to buy a further $4m new shares when Vernalis launches an equity fund raising and Mr Sturge promised a resolution to the company's funding difficulties soon. "It is our goal to secure the long-term financial position of the company in the next two or three months," he said.Reuse content