Xenon deal seen as bolstering B.C.’s global biotech reputation

October 10-16, 2006
Business in Vancouver
Issue 885
Daniela Tuchel

US$80 million agreement with Japan’s largest drug maker is the latest in a series of coups for the province’s pharmaceutical sector

Last week’s multimillion-dollar agreement between Burnaby’s Xenon Pharmaceuticals Inc. and Japan’s largest drug maker enhances B.C.’s international biotech reputation, say industry analysts.

The US$80 million deal licenses Osaka-based Takeda Pharmaceutical Company Ltd. to develop and market Xenon’s XEN401 painkiller in Japan and six other Asian countries. XEN401 is currently in pre-clinical development.

Takeda will make initial and milestone payments of up to $75.5 million to Xenon. It will also buy $5 million worth of Xenon shares and pay royalties on all product sales.

“The deal,” said Xenon CEO Simon Pimstone, “is very strategic for Xenon in that it enables us to retain the bulk of the product value … the major pharmaceutical markets of the U.S. and Europe.”

“While the agreement might be less than our 2004 Novartis deal, it’s of a greater strategic value in that it allows Xenon to advance the pain product significantly further downstream in clinical development.”

The other Asian countries covered in the deal are Taiwan, Thailand, Indonesia, the Philippines, South Korea and Malaysia.

According to Pimstone, the agreement was driven by a combination of science and product opportunity.

“Takeda was an absolutely outstanding partner to deal with during the negotiation process,” Pimstone said, “very fair and extremely honourable. We expect this to be an outstanding partnership.”

Xenon’s is one in a series of major biotech agreements secured in the past two years between B.C.-based companies and major international firms. Others include the company’s drug development deal with Swiss pharma giant Novartis Pharma AG, which has an estimated value of up to US$157 million, and a US$475 million research, develop and commercialization agreement between Neuromed Pharmaceuticals Ltd. and New Jersey-based Merck & Co.

BC Biotech executive director Karimah Es Sabar said Xenon’s latest deal underscores “the calibre of Canadian science and companies.”

“I believe this agreement will certainly open the door to many more associations and collaborations with other Asian companies.

“B.C. is very well-placed geographically and culturally. There are synergies between Japanese and B.C. companies that we can explore together.

“For biotech Canadian companies to be successful it’s crucial to close such global alliances.”

Xenon CFO Vijay Sondhi said Japanese pharmaceutical company interest in B.C. is growing.

“Most Canadian businessmen think that it takes a long time to close up a deal with a Japanese company because of language and cultural differences. We made the deal incredibly fast: in about six months.”

“The Japanese love Vancouver. It’s very easy to convince them to come and visit.”

Xenon, which was incorporated in 1996, is aiming to have its pain and cardiac arrhythmia products into clinics next year.

“We’d love to build a commercialization capability here in Vancouver and develop Xenon into one of the major biotech companies globally,” Pimstone said.