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Auckland-based Neuren Pharmaceuticals has bought a US drug company to target a multibillion-dollar market for treating post-stroke depression.
The purchase of Washington DC-based Hamilton Pharmaceuticals for $4.4 million will get Neuren the licence to a compound called Motiva.
The drug is being developed for psychological and cognitive disorders caused by stroke, traumatic brain injury, Alzheimer's and Parkinson's diseases.
Neuren chief executive David Clarke said the deal had the full backing of the company's board. "We've got a late-stage pre-clinical asset in a field that we know very well that we've purchased for a very cost-effective price, with two new shareholders who give the firm a great deal of international credibility."
Neuren needs shareholder approval for the deal and will also pay Hamilton US$1 million ($1.4 million) in warrants and a further $3 million in shares if the drug reaches defined milestones.
"We're quite happy to do that because if we do get to register this drug it would be worth hundreds of millions," Clarke said.
Tom Duthy, biotechnology analyst at Australian stockbroker Taylor Collison, said the deal brought three US blue-chip life science investors on to Neuren's register.
"I think what will happen now is the perception and the knowledge of Neuren Pharmaceuticals in the US particularly will grow," Duthy said.
"It puts them at the very forefront of leading [central nervous system] companies in the world."
Clarke said Motiva had proven effectiveness in phase II trials for a broad range of cognitive deficits but Neuren planned to run another trial to prove definitively the drug could be targeted at post-stroke depression.
The post-stroke depression market was worth more than US$2 billion globally, he said.The drug could take six to seven years to reach the market.
The initial payment of US$4.4 million would be paid in Neuren shares at the average closing price for the five trading days before yesterday's announcement, giving Hamilton's current owners about a 14 per cent stake in the company. Neuren, which is listed on the ASX, closed at A34c yesterday.
A further US$3 million would be invested in Neuren by way of a convertible note by two of Hamilton's investors - Vivo Ventures and CNF Investments.
Hamilton approached Neuren when it was looking to sell the drug to a company in which it had confidence to run trials. The opportunity was too good to pass up, Clarke said.
