Shares of biotech Neurogen
Under the deal, Merck will pay Neurogen a $15 million license fee, make a $15 million investment in Neurogen, and provide $12 million in development funding over the first two years of the agreement. Neurogen also stands to receive up to $118 million in research, development, and milestone payments, plus royalties if the collaboration brings a drug to market.
The agreement represents Merck's latest move to restock its pipeline. LikeSchering-Plough
The situation is made that much more immediate by Merck's string of late-stage failures. Just last month, the company discontinued development of diabetes compound MK-767, which had been in Phase III testing. The week before, it cut off another drug in Phase III, depression drug MK-0869.
But those looking for a quick fix at Merck won't get it here. With its latest-stage prospect in Phase II testing, Neurogen's contribution to Merck is still several years off. That said, we can certainly appreciate a company laying the foundation for the long-term.
For Neurogen, the benefits are considerably more tangible. Through nine months this year, the company has burned through $26 million in cash, leaving a mere $53 million on hand at the end of September. If nothing else, while investors wait out the trials, Merck has given Neurogen a lifeline.
Talk drug alliances on the Merck discussion board -- only at Fool.com! Jeff Hwang can be reached at [email protected].