Biovail Corporation's wholly-owned subsidiary has entered into a definitive agreement to acquire worldwide development and commercialization rights to the entire portfolio of tetrabenazine products, including Xenazine/Nitoman (tetrabenazine tablets), and the associated intellectual property rights held by Cambridge Laboratories (Ireland) Ltd and its affiliates.
The transaction is anticipated to close within 90 days, subject to customary closing conditions. In November 2008, Xenazine was launched in the United States, where it has orphan drug status through August 2015 for the treatment of chorea associated with Huntington's disease. In Canada, Nitoman has been available since 1996 and is indicated for a number of hyperkinetic movement disorders, including Huntington's chorea, Tourette Syndrome and tardive dyskinesia. Tetrabenazine is marketed through distribution agreements in a number of countries, including Australia, Denmark, France, Germany, Ireland, Israel, Italy, New Zealand, Portugal, Spain, Switzerland and the United Kingdom, with license applications pending in several European territories.
"This acquisition will be immediately accretive to revenues, margins and operating cash flows, and is anticipated to be moderately accretive to GAAP earnings per share in 2010. The transaction represents another solid step in our transformation to a leading specialty CNS company," said Bill Wells, chief executive officer of Biovail. "Xenazine is showing strong commercial success in the US in treating chorea associated with Huntington's disease. By acquiring these worldwide rights, we believe we will be able to maximize the value of this asset in the near term for shareholders. In addition, the acquisition further expands our specialty CNS pipeline, which bolsters our long-term revenue growth outlook."
Under the terms of the agreement, Biovail will make a payment of $200 million upon closing of the transaction and will pay an additional $30 million in two tranches over the subsequent 24 months to acquire these worldwide development, manufacturing, and commercialization rights to the tetrabenazine product portfolio. This includes a controlled-release formulation of tetrabenazine in development for Tourette Syndrome (BVF-018), as well as a tetrabenazine-derived new chemical entity (NCE), RUS350 - a next-generation molecule that may enter phase-2 clinical development in the next 12 months.
In addition, Biovail will obtain a broad range of intellectual property for the product portfolio, including issued and pending patents. The agreement enables Biovail to capture the gross margin earned by Cambridge on its supply of product for the US and Canadian markets. Biovail will assume a royalty obligation to a third party.
Tetrabenazine tablets in Canada are marketed under the Nitoman brand name by the Biovail Pharmaceuticals Canada sales force. In the United States, Biovail supplies Xenazine tablets to its commercialization partner for a variable percentage of the product's annual net sales. For net sales up to $125 million, Biovail's supply price is 72 per cent of net sales. Beyond $125 million, Biovail's supply price is 65% of net sales. Upon closing of the transaction, Biovail will earn revenue from the worldwide sales that have been established through Cambridge's network of marketing partners in approved territories. Biovail anticipates seeking marketing approval in countries where treatment for chorea associated with Huntington's disease will be commercially viable.
The transaction is immediately accretive to revenues and margins, and is expected to provide minimal operating cash flows in 2009 and in the range of $23 million to $26 million in 2010.
Tetrabenazine is a highly selective and reversible centrally-acting dopamine depleting drug that works by inhibiting a molecule known as vesicular monoamine transporter 2 (VMAT2).