NOVA/SMITHKLINE BEECHAM PARTNERSHIP WILL MARKET PSYCHIATRIC LINE

NOVA/SMITHKLINE BEECHAM PARTNERSHIP WILL MARKET PSYCHIATRIC LINE including Thorazine (chlorpromazine), Stelazine (trifluoperazine), Eskalith (lithium carbonate) and Parnate (tranylcypromine) under an agreement at the letter of intent stage, announced April 23. The joint venture marketing agreement essentially replaces an R&D agreement between Baltimore, Md.-based Nova and SmithKline. The four products generated sales of approximately $34 mil. in 1989. SmithKline Beecham will continue to manufacture and distribute the four products on behalf of the partnership. However, notably absent from the group of transferred products is SmithKline's antiemetic/antipsychotic Compazine (prochlorperazine), which is understood to be doing quite well. SmithKline Beecham will transfer its 75-person psychiatric product sales force to the partnership under the new agreement. "Using this sales force as a base," the two companies explained, "the partnership plans to build a specialty marketing capability targeted to psychiatrists and neurologists." SmithKline Beecham retains the option to use the partnership's marketing capability when marketing new CNS drugs in the U.S. In addition, the two companies said that the partnership will actively seek in-licensing arrangements for other psychiatric products to expand the partnership's product base. SmithKline and Nova had penned an agreement in May 1988 that covered the research and development of novel bradykinin receptor agents as well as established a partnership for developing and marketing CNS agents. SmithKline paid Nova $25 mil. in August 1988 under that agreement in return for a 10% equity stake in the R&D company. SmithKline was also going to make an additional $24 mil. investment in Nova in 1992; however, that part of the earlier agreement is now canceled. As conceived two years ago, the CNS partnership was to have run for an initial term of seven years and been a 60/40 agreement with SmithKline holding the majority position. In addition, once Nova's first product was approved, SmithKline was to have allowed the partnership to begin marketing the company's CNS line of drugs. However, two events have altered the Nova/SmithKline relationship. First, the merger with Beecham has led to consolidation of R&D programs and a paring back of several outside R&D agreements. Secondly, Nova and SmithKline Beecham announced in January that clinical work on Nova's aerosol bradykinin antagonist, the lead compound covered by the 1988 R&D agreement, had been called to a halt because of difficulty showing efficacy. As part of the revised agreement, Nova will increase its stake in the partnership from 40% to 60% and will reacquire the rights to its CNS research programs, including work on EAA (excitatory amino acid) receptor antagonists, Sigma receptor antagonists and CRF (corticotropin releasing factor) receptor antagonists. All three programs are still in early research. However, SmithKline Beecham retains the option to co-develop and co-market products that emerge from Nova's CRF receptor antagonist research unless Nova elects to repurchase most or all of its stock now held by SmithKline Beecham. The preliminary agreement gives Nova an option to repurchase the 2.7 mil. shares of its stock acquired by SmithKline under the earlier agreement through March 31 of next year under either of two conditions: Nova can choose to pay $4 a share for all of the 2.7 mil. shares for a total of $10.8 mil.; or can elect to pay$5 a share over time for any amount of the stock. However, once Nova reacquires 1.5 mil. of its shares, SmithKline Beecham's option to codevelop and comarket the CRF receptor antagonist product is cancelled.