Catching the pipeline

TURKU, Finland—Biotie Therapies has reached an agreement toacquire Newron Pharmaceuticals for up to $63 million worth of shares.

The deal creates a single biotech with a pipeline of centralnervous system (CNS) treatments, including two late-stage programs forParkinson's disease and alcohol dependence.

The combination of the two would create a biopharmaceuticalcompany with significant CNS expertise, international operations andindustry-leading partners including Lundbeck, Roche, Merck Serono and UCBPharma.

Biotie CEO Timo Veromaa says the transaction is "a win-winfor both companies' shareholders and confirms Biotie as a key consolidator ofhigh-quality CNS assets."

According to Veromaa, the company had been searching for apartner with a pipeline and focus that is highly complementary with Biotie's aspart of an ongoing process to build its business.

"In Newron, we saw a highly complementary match, with anattractive late-stage asset, safinamide, and a broader pipeline focused onCNS," he says. "In combining the two companies, we are strengthening our positionin the CNS space and establishing a more balanced franchise from which tocreate long-term value."

Luca Benatti, managing director and CEO of Milan,Italy-based Newron, points out that "we have been working hard to find theright partner, and in Biotie we believe we have the best combination to createa European entity with critical mass to ensure that our pipeline will generatevalue for our shareholders."

Newron's lead drug, safinamide, is an oral, once-dailyadd-on treatment for Parkinson's disease. Data on two late-stage studies aredue to arrive in the first half of 2012. Earlier this year, the companyreported that the treatment lowered patients' dyskinesia when it was combinedwith the commonly used levodopa. The treatment is partnered with Merck Serono.

Veromaa says company officials believe there could be valuein the acquired Newron pipeline beyond safinamide.

"We will use the coming months to identify those projects wesee as best placed to create long-term value for our shareholders and willannounce the results of this pipeline review when it has been concluded," hesays.

Moreover, Veromaa says his company is familiar withsafinamide, given its expertise in the CNS space, and viewed this acquisitionas an attractive asset and one that would fit very nicely within Biotie'sexisting portfolio.

"Newron had been looking for an M&A partner on the basisthat bigger is better, and therefore the opportunity presented itself for us tocombine our pipelines and expertise to create a larger, more robust business,"he explains. "When such opportunities arise, companies need to be able to movequickly to realize the best value for their respective shareholders."

The combined entity will continue to focus on thedevelopment of innovative, clinically differentiated medicines to address unmetmedical needs, primarily associated with neurological and psychiatric diseasesand selected inflammatory diseases.

Veromaa points out that nalmefene, a small-molecule opioidreceptor antagonist for alcohol dependence, is Biotie's most advanced productand is partnered with Lundbeck.

Through its earlier acquisition of Synosia Therapeutics,Biotie has another Parkinson's disease candidate, SYN-115 (tozadenant), anorally administered, potent and selective inhibitor of the adenosine 2a (A2a)receptor, in Phase IIb trials. Biotie has granted a worldwide license to UCBPharma for the development of the compound through Phase III trials andsubsequent commercialization.

"Safinamide and tozadenant have different mechanisms ofaction and, assuming they are both successful, could offer physicians valuableadditional options to treat Parkinson's disease," notes Veromaa. "We believethe products will complement each other, but the overall target profile andpositioning will be determined by their respective partners. Both have thepotential to be best-in-class in their respective categories and to offerbenefits over the currently marketed products and those in development."

The structure of the Newron organization in Italy andSwitzerland will be reviewed in accordance with Biotie's needs going forwardbased on the resulting pipeline. The transaction is not expected to affectBiotie's operations or organizations in Finland and in the United States.

"There are some synergies in drug development where thecapabilities of the two companies overlap, so we do expect some cost-savings tobe realized," explains Veromaa. "Restructuring and some redundancies are likelyas we integrate the two organizations after the deal closes."

Newron had 29 employees when the transaction was announced.

Stefan Weber, Newron's chief financial officer, has agreedto join Biotie. Benatti will support Biotie through the integration and thenplans to step down.

The acquisition is subject to approval by Biotie's board andplans call for the deal to close before the end of 2011.