In a complex deal involving four companies in three nations, Biovail gained control of Xenazine (tetrabenazine tablets), the first drug approved in the U.S. for Huntington's disease, by purchasing privately held Prestwick Pharmaceuticals for $100 million, the companies announced Sept. 17.

By acquiring Washington, D.C.-based Prestwick, Biovail, based in Toronto, accepts the former's out-licensing of U.S. commercialization rights for Xenazine to Ovation Pharmaceuticals. Biovail will market Xenazine in Canada and obtains an option to co-promote the dopamine depleter eventually in the U.S.

Under the deal, Biovail also has an agreement with Deerfield, Ill.-based Ovation to jointly develop follow-on indications for Xenazine and related products in the U.S.

Cambridge Laboratories Group of Dublin, Ireland, is the worldwide license holder for Xenazine, which has been available as Huntington's therapy in Europe for more than 30 years and in Canada since 1996.

Xenazine was approved by FDA for chorea - jerky, involuntary movements symptomatic of Huntington's - on Aug. 15, on its second go-around, following a unanimous vote in its favor by the Peripheral and Central Nervous System Drug Advisory Committee last December (¹ Also see "Hungtington’s Orphan Drug Xenazine Clears FDA With REMS" - Pink Sheet, 15 August, 2008.). As an orphan drug, Xenazine will receive seven years of U.S. market exclusivity.

At the time of approval, Prestwick said U.S. launch of the product would occur before the end of 2008. Upon acquiring U.S. commercialization rights (for undisclosed financial terms), Ovation confirmed the drug will launch by the end of the year.

The NDA for Xenazine was the subject of a March 2006 "approvable" letter by FDA, which resulted in last December's advisory committee review (² Also see "Prestwick’s Xenazine For Huntington’s Chorea Gets Positive Vote From FDA Panel" - Pink Sheet, 6 December, 2007.). The panel voted that the drug showed a favorable risk-benefit profile despite concerns about adverse events, including associated cases of akathisia, parkinsonism, depression and dysphasia.

Strong efficacy data from two Phase III trials backed the filing, and prior marketing experience outside the U.S. showed no serious safety problems had ever been reported. However, Xenazine became one of the first drugs to be approved by FDA with a Risk Evaluation and Mitigation Strategy, the new risk-management protocol specified under the FDA Amendments Act.

The REMS is intended to minimize the risk of depression and suicidal thoughts associated with use of Xenazine and will include educational materials provided to prescribers, pharmacists and patients, as well as a Medication Guide to inform patients and caregivers of risks.

Deal part of Biovail reorganization strategy

Acquisition of Prestwick is part of a new strategic focus for Biovail, Canada's largest publicly traded pharma, which has been plagued in the past year by an $83 million shareholder lawsuit and fraud charges by the U.S. Securities and Exchange Commission (³ Also see "Biovail’s Aplenzin Wins FDA Go-ahead" - Pink Sheet, 23 April, 2008.).

In an interview, Biovail told "The Pink Sheet" DAILY it only wants to commercialize Xenazine in Canada at present because it lacks a U.S. sales force. Ovation will apply its 48-person force, experienced in marketing therapies for other central nervous system disorders, to the U.S. market, while Biovail will run a three-person outfit for Canadian marketing of the drug, under the brand name Nitoman .

In acquiring 100 percent of Prestwick, Biovail also obtains several other early-stage candidates for Parkinson's disease and schizophrenia.

For Biovail, the possibility of co-promoting the drug at a later date was a key factor in the deal, along with the joint development of follow-ons with Ovation, the company said. In a release, Biovail CEO Bill Wells added that "the transaction meets all of our acquisition criteria, and represents Biovail's first commercial exposure to specialty markets in CNS disorders."

The drug's supply chain will be a complex arrangement, under which Biovail will pay Cambridge a variable supply price ranging between 50 percent and 67 percent of net sales. In turn, Biovail will supply the drug to Ovation for a percentage of U.S. net sales.

On net sales up to $125 million annually, Biovail will receive 72 percent of net sales. Above that total, Biovail receives 65 percent. At both tiers, Biovail will forward 50 percent of net sales to Cambridge.

In a Sept. 17 analysis of Biovail, Randall Stanicky of Goldman Sachs estimated gross margin contribution of slightly more than 30 percent for Biovail, after factoring in Cambridge and Ovation's takes. If U.S. sales exceed $125 million, however, Stanicky projects Biovail's margin at 21 percent or more. Added to that, Canadian sales of the drug should be above $6 million a year, he said.

"Tetrabenazine will provide an early platform for other product additions as management looks to build out U.S. sales operations over time," Stanicky wrote. "U.S. represents the key opportunity with greater than 25,000 patients and, we believe, the ability to price at premium, with launch expected in December."

Prestwick, which failed in an effort go public three years ago, sold out for less than it had raised in equity investments over the years, roughly $112 million. It seems likely the firm's investors saw the Biovail deal as the best option in a troubled business climate.

-Joseph Haas (j.haas@elsevier.com)

Prestwick Buyout Scores Huntington’s Drug For Biovail

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