BioWorld International Correspondent

It all started at F. Hoffmann-La Roche Ltd.

To be more precise, it all started in the cardiovascular research program at the Basel, Switzerland-based pharmaceutical giant. The founders of Actelion Ltd. led that unit, Axovan AG founders cut their teeth there, and each company has licensed molecules originally discovered in Roche's labs. Now they are joining forces in a cash-based deal that could eventually be worth up to CHF252 million (US$191.9 million) to Axovan shareholders.

Actelion is paying CHF60 million initially for privately held Axovan, which has raised CHF38 million over two funding rounds. The balance would be payable when Axovan hits a series of milestones in the years ahead. Depending on progress, Actelion could hand over between CHF35 million and CHF50 million in 2004.

Axovan's chief financial officer and head of business development, Philippe Dro, declined to outline the structure of the deal, but said it was based primarily on the progress of its lead compound, clazosentan. The compound, an endothelin A receptor antagonist in development for the treatment of vasospasm following subarachnoid hemorrhage, recently completed a Phase IIa trial. Axovan has yet to publish full details of that study, but the data were sufficient to grab Actelion's attention. (See BioWorld International, Aug. 12, 2003.)

"Clearly it is in the light of the results of this study that we have decided to acquire Axovan," Actelion CEO Jean-Paul Clozel said in a conference call Tuesday.

"We thought that Actelion is probably the best company in the world to bring that product to the market," Dro told BioWorld International. Actelion has commercialized the first endothelin receptor antagonist, Tracleer, and scientists now working at Actelion and Axovan were responsible for discovering clazosentan in the early 1990s while at Roche.

"I would say, generally, [clazosentan] is a high-risk compound," Sally Bennet, analyst at ING Barings in London, told BioWorld International. "I think the reason Axovan has been taken over is that it is going to require a significant amount of cash to take it into a Phase IIb or even a pivotal registration study," she said. "Trying to show its efficacy in a population of patients who are quite ill at the time of surgery is going to be quite difficult."

The companies, both of Allschwil, Switzerland, share an ongoing business relationship, as well as a common origin. Actelion, which was formed in 1997, was a founding shareholder in Axovan, established in 2000, and currently holds close to 9 percent of the company. The companies also entered a two-year research collaboration this summer, based around optimizing and developing molecules that act on endothelial drug targets that belong to the G protein-coupled receptor category. Actelion said it would offer positions to all of Axovan's staff, which numbers more than 50 people. The latter firm's CEO and co-founder, Olivier Valdenaire, will drive the integration. The logistics of the process should not be overly demanding - the two companies are based in the same building, separated by two floors.

Actelion's guidance will remain unchanged for the remainder of the year, Chief Financial Officer Andrew Oakley said on the conference call. Because of Actelion's shareholding in Axovan, combined with the latter's existing cash balances, the initial outlay for Actelion will amount to around CHF40 million, he said. The company held CHF124.7 million at June 30, but might raise additional cash to finance the deal.

"We are currently evaluating a number of different financial alternatives that could include, but are not limited to, equity-linked instruments such as convertible bonds," Oakley said.