CRO Novotech invests in Algernon, lands deal to run trial
Algernon is developing a N-methyl-D-aspartate (NMDA) receptor antagonist, ifenprodil, for use in the treatment of idiopathic pulmonary fibrosis (IPF) and chronic cough. The small molecule, which was originally developed by Sanofi in peripheral circulatory disorders, compared favorably to existing treatments for IPF sold by Boehringer Ingelheim and Roche in preclinical tests run by Algernon.
Buoyed by the preclinical data, Algernon plans to run a Phase II clinical trial to assess how ifenprodil performs in humans. Algernon is leveraging clinical safety data generated by Sanofi to move straight into the proof-of-concept study.
Novotech, a contract research organization (CRO) focused on the Asia Pacific region, has won the contract to run the Phase II IPF trial. Algernon expects the study to get underway in the second quarter of 2020.
The deal differs from typical arrangements between CROs and drug developers in one notable way. Novotech has agreed to invest around CDN$220,000 (€151,000) in Algernon.
Under the terms of the private placement, Novotech is set to pay CDN$0.085 per share. The payment also gives Novotech the right to buy more Algernon stock at CDN$0.12 a share for up to 30 months after the original transaction.
Algernon can bring forward the deadline by which Novotech may buy the additional shares if its stock trades above CDN$0.35 for 20 consecutive days. The stock closed at CDN$0.07 prior to news of the Novotech deal.
The equity component of the agreement positions Novotech to profit if Algernon’s share price rises. Novotech CEO John Moller highlighted the novelty of that reward model in a statement to disclose the agreement with Algernon.
Moller said, “We are delighted to be working with Algernon on their upcoming Phase II study and to have signed [a letter of intent] to participate in an equity funding round of Algernon. This is a unique model to support clinical trials in our region.”
Risk-sharing deals have been around in various forms for years without becoming the norm for CROs. Such deals require a larger upfront investment from the CRO and position service providers to profit from the progress of assets that may compete with drugs developed and sold by their other clients.
