Neuren Pharmaceuticals Ltd. supplemented its late-stage neurology pipeline with the acquisition of Hamilton Pharmaceuticals Inc., gaining access to Hamilton's Phase II drug for central nervous system disorders, Motiva.

Hamilton board member and investor Robert Flanagan, executive vice president of CNF Investments LLC, said Hamilton had been looking for an opportunity to link Motiva to an experienced CNS company and saw the Neuren deal as a "great fit."

Sydney, Australia-based Neuren will acquire Washington-based Hamilton for $4.4 million in Neuren shares priced according to an average over the past five trading days. Neuren also will pay Hamilton's investors up to $4 million in milestone payments, including $500,000 in warrants upon the completion of Phase II Motiva trials, $500,000 in warrants upon the initiation of Phase III trials, $1 million in shares at regulatory filing and $2 million in shares at regulatory approval.

The warrants will be convertible into shares at the original deal price, while subsequent shares will be priced according to market value.

As part of the deal, Hamilton's investors - Vivo Ventures, CNF Investments and Index Ventures - all will become Neuren shareholders. Vivo and CNF also will invest $3 million into Neuren through a convertible note, which will convert to ordinary shares on the same terms provided to investors in the next major fundraising.

Hamilton's shareholders unanimously approved the deal; Neuren's shareholders have yet to vote. Shares of Neuren (ASX:NEU) remained steady at 31 cents on Tuesday.

Neuren doesn't plan to retain any of Hamilton's management and said ongoing operating costs will be negligible. What Neuren does get out of the deal is Motiva, a "very promising compound" with a mechanism of action that may be applicable in treating psychological and cognitive disorders due to stroke, traumatic brain injury, Alzheimer's disease and Parkinson's disease, noted Lawrence Glass, Neuren's executive vice president of biology.

Motiva increases neurotransmitter concentrations in the cortex of the brain, targeting certain disabling psychiatric effects associated with stroke and other brain disorders. Hamilton licensed the drug from Daiichi Pharmaceuticals Co. Ltd. in 2004 after it failed a trial in depression. Flanagan said Hamilton "felt there was an indication for [the drug] in stroke and traumatic injury to the cortex of the brain."

Glass said the preclinical data on Motiva are "very compelling" and the fact that Hamilton had opened an investigational new drug application for Phase II trials will allow Neuren to proceed quickly into the clinic.

A Phase II trial is planned for early 2008 in patients with depression due to a recent stroke, and data may be available as early as mid-2009.

Glass said the protocol has not been finalized but the trial will likely enroll about 200 patients in the U.S., Australia and New Zealand to take a broad look at depression and cognitive function.

"We'll use the Phase II trial to identify the most sensitive patients and endpoints," Glass said.

Motiva isn't the only drug Neuren will be advancing through clinical trials next year. The company recently initiated a Phase III trial of Glypromate (Glycine-Proline-Glutamate) in the treatment of mild cognitive impairment following cardiopulmonary bypass surgery.

The company said that an estimated 40 percent of patients undergoing coronary artery bypass graft surgery experience some degree of persistent, long-term neurological deficit.

Glypromate is a naturally occurring small molecule derived from Insulin-like Growth Factor-1. Neuron is coordinating with Madigan Army Medical Center in Tacoma, Wash. regarding the initiation of an investigator-sponsored Phase II trial of the drug in reducing brain injury caused by heart attack.

Neuren also plans to begin a pair of Phase II trials next year with NNZ-2566 in mild-to-moderate and severe traumatic brain injury. The trials will be conducted in cooperation with the U.S. Army. NNZ-2566, a highly potent small-molecule analogue of Glypromate, is finishing a Phase Ib trial.

Beyond its clinical programs, Neuren has a slew of compounds in preclinical development, including small molecules for neuronal repair, compounds for neuronal protection and a gene family of neuronal growth factors, not to mention compounds for cancer and diabetes.

Glass attributed the "embarrassment of riches" to Neuren's licensing agreements with the University of Auckland, but said the 18-person company doesn't intend to carry all the products forward alone and is "actively engaged" in partnership discussions, especially for the cancer programs and for preclinical programs targeting chronic CNS diseases like Parkinson's disease. He noted that Neuren has the means to retain all rights to Glypromate, Motiva and NNZ-2566 through commercialization, although the company might be open to a deal for the right partner at the right terms.