Naurex

Over the weekend, Naurex announced that it had been acquired by Allergan (Actavis/Forest) for $560 million plus undisclosed milestones; Allergan is focused upon Naurex’s two clinical-stage Rapid-Acting-Antidepressant candidates, IV rapastinel/GlyX-13, and orally-bioavailable NRX-1074. NIR has been following this particular technology since 2003, through its iterations as Nyxis Neurotherapies and then Naurex; in fact the first time we invited Naurex to present GlyX-13 as a ‘Top Partnering Opportunity’ at the TAP conference was back in 2010. We must admit that at first, our reaction to the sale announcement was lukewarm: After all, this has been another year of an open door for IPOs, and if an Axovant could take in $362 million, what might the far-more-promising Naurex portfolio have garnered by going public? Surely a new CNS record could have been set. But Naurex knew that, and the decision to sell rather than go public was based on calculations that were less drama-laden, but more rational:
To take both rapastinel and NRX-1074 all the way through clinical development would have required an enormous investment in infrastructure-building. Naurex has remained a barely-larger-than-virtual company, and while such expansion could have been achieved, receiving $560 million plus undisclosed later milestone payments represents a healthy ROI for its shareholders, particularly as it comes prior to the expense and risk  attached to Phase III trials and the regulatory maze.  These hurdles, yet-to-be-surmounted, are the reason for the divergence between this upfront valuation and that seen for the lower-risk, lesser-potential of Avanir and Auspex, each of which sold for $3.5 billion.
The two other interesting considerations are these: Allergan just announced the sale of its generics business to Teva Pharma, and the acquisition of Naurex makes tangible their intention to keep CNS as a key component of their branded pharma agenda. Given the recent and ill-considered retreats from CNS by several formerly major pharma companies, it can only be good for the neuroscience area to have a company with resources and chutzpah add itself to the licensing/acquisition mix, and their Forest-legacy depression expertise guarantees a highly-competent clinical trial and commercialization process.  But they are not looking to build an inhouse neuroscience research capability, and thus Naurex will spin out its preclinical assets, constituting a glutamatergic platform with potential in cognition and pain, into an independent company. The details on the latter are sketchy, other than Allergan will have right-of-first-refusal for several compounds, but we like the fact that there will be a small company, a ‘NuNaurex’, that will continue with its portfolio building, something that it could not have fostered had all of its energies and resources been funneled into late-stage clinical development. From a neuro ecosystem perspective, it is one of those elusive ‘win-win’ scenarios.