Xenon signs with Japanese company

October 3, 2006
Vancouver Sun
By Gillian Shaw

Takeda Pharmaceutical deal worth $80 million US 

Burnaby’s Xenon Pharmaceuticals announced an $80-million US deal Monday with Takeda Pharmaceutical Co. in what is being billed as the largest pre-clinical partnership between a biotech and a Japanese pharmaceutical company.

Under the agreement, Takeda — Japan’s largest pharmaceutical company— is paying up to $75.5 million US, plus injecting another $5 million to double its equity stake in the privately held Xenon. In return it will develop and commercialize the oral formulations of XEN401, a drug for the treatment of chronic and acute pain, in Japan and six other Asian countries.

Xenon retains the rights to XEN401 for the rest of the world, including U.S. and European markets, and expects to file with the U.S. Food and Drug Administration for clinical trials in 2007.

While the deal pales in comparison to the almost half-a-billion dollar agreement reached last year between Neuromed Pharmaceuticals and drug giant Merck & Co., it marks a coup for a Canadian company raising money in Asia. Xenon managed to tap the lucrative Asian market while retaining rights to its product in North America and Europe.

“We believe this is the largest deal for a preclinical product done by a biotech with a Japanese company,” said Dr. Simon Pimstone, Xenon’s chief executive officer. “This allows Xenon to retain the bulk of the global market for this product.”

With the market for pain drugs in Japan reaching the $2 billion US mark annually, the second largest in the world after the U.S., Pimstone said the agreement gives his company the Japanese partner it needs to develop and commercialize XEN401 in that country while at the same time fuelling the company’s growth at home.
 
“Our goal is to retain an integrated pharmaceutical company here in Vancouver,” he said. “I am hoping Xenon doesn’t go the way of many other companies.

“That’s the challenge for our companies — if you are successful you come to the interest of major global players — we have to protect this centre and let it grow,” he said.

British Columbia’s biotech sector has a growing reputation as an incubator for world-class discoveries that end up being commercialized elsewhere. Most recently, Langley’s AnorMed has become the subject of a bitter takeover battle as competing U.S. companies vie for its promising anti-cancer medication Mozobil, which is in late-stage drug trials.

The dilemma facing companies here is the long and costly road to commercialization, one that forces them to go outside Canada’s borders seeking investors in the U.S. and, increasingly, Asia.
“It is a very capital-intensive business,” said Pimstone. “If you want to take these products further forward, you have to have the capital to do so.”

Monday’s announcement marked the latest step in the partnership that began with Takeda’s initial $5-million US investment in Xenon announced earlier in September. Takeda also has the right of first negotiation to select atherosclerosis discoveries made by Xenon. Atherosclerosis results in the formation of plaque that eventually narrow coronary arteries, causing heart disease.

In the most recent agreement, Xenon will receive an upfront cash payment of an undisclosed amount and will be eligible for development and regulatory milestone payments, as well as sales-based payments on the successful commercialization of XEN401.

Takeda will also pay Xenon royalties on all product sales and it has an option to backup compounds to XEN401 that are developed by the Burnaby company.