Allergan Completes Licensing Deal After Pfizer Bid Collapses

LONDON—Allergan PLC completed a licensing deal to develop drugs for Alzheimer's and other neurological conditions just hours after the collapse of its $150 billion tie-up with Pfizer Inc., underlining its determination to move on as a stand-alone company.

Under the deal, Allergan will pay $125 million up front to Heptares Therapeutics, a U.K.-based biotechnology company wholly owned by Japan's Sosei Group Corp., plus $665 million in milestone payments for the successful completion of clinical trials. A further $2.5 billion in milestone payments, plus royalties, will depend on the eventual commercial success of the drugs. Allergan has also agreed to invest $50 million in a joint research-and-development program to advance several drugs to mid-stage human testing.

The move will help assure investors that the sudden withdrawal of the Pfizer deal, as a result of new rules from the U.S. Treasury Department designed to prevent what are known as tax-inversion deals won't disrupt business as usual at Dublin-based Allergan.

The White House and the Treasury Department pushed back against criticism of the new rules. They argued that they were shutting down unfair loopholes that allow large companies to shift their tax affairs to countries with less burdensome levies by merging with smaller firms.

Chief Executive Brent Saunders on Wednesday said Allergan could "act immediately if we saw the right opportunity with the right growth profile and the right strategic logic."

Malcolm Weir, chief executive of Heptares, said Allergan's focus was apparent in his interactions with the company. "We never got any sense of breaking of stride with Allergan," Mr. Weir said. "They always showed a face of very clear focus on what they were trying to do with their business."

The deal involves three classes of drugs in early-stage development, that aim to treat symptoms of Alzheimer's such as cognitive problems and psychosis. The most advanced program has two drugs in early human testing.

Heptares's drug-discovery platform centers on its ability to precisely determine the shape of molecules that appear on the surface of cells. Such molecules, which are commonly used as drug targets, are difficult to analyze because they become unstable when extracted from their natural environment. Technology such as Heptares's helps researchers design drugs more closely tailored to their targets, reducing the risk of side effects, which arise when drugs bind with other molecules in the body.

Several other large pharmaceutical companies, including Pfizer, AstraZeneca PLC and Teva Pharmaceutical Industries Ltd., have struck licensing deals to access Heptares's technology, though the Allergan deal is its biggest yet.

David Nicholson, head of global brands research and development at Allergan, said Heptares's compounds had "shown promising results in early development," including evidence they could act without causing side effects.

Write to Denise Roland at [e-mail]

(END) Dow Jones Newswires

April 07, 2016 08:45 ET (12:45 GMT)

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