Evotec said today it will not receive an anticipated “significant” payment from Johnson & Johnson’s Janssen Pharmaceuticals unit after a collaboration launched a year ago this month to develop antidepressant drugs showed inadequate progress to trigger the planned milestone cash.
According to Evotec, preclinical studies of its NR2B subtype selective NMDA antagonist portfolio by Janssen “did not confirm certain properties of the antagonist and did not justify the planned immediate development progress” that would warrant the milestone payment.
The collaboration’s future is uncertain: “The project is currently under evaluation at Janssen,” Evotec said in a statement, adding that it “will be obliged to evaluate the impairment of up to €22 million ($30.2 million) of intangibles in respect of these “legacy assets” on Evotec´s balance sheet.
The statement did not make clear if the €22 million represented the size of the planned milestone payment, included planned subsequent payments. Neither the amount, nor the specific milestone to which the payment was tied, were disclosed.
Janssen agreed to pay Evotec up to $160 million in total milestone payments on top of a $2 million up-front payment when the companies launched their collaboration in December 2012 to develop a series of antidepressants called EVT100. Back then, Evotec said it anticipated receiving “an additional $6 million to be paid upon confirmation of certain preclinical properties of the candidates,” according to a press release issued at the time.
Under their collaboration, Evotec was eligible for up to $67 million for the first product “depending on certain clinical, regulatory, and launch events,” as well as additional milestone payments “upon successful completion of certain events for additional indications and/or compounds,” according to the 2012 release.
It added that Evotec could be entitled to an additional $100 million in commercial milestones depending on meeting certain sales thresholds, as well as royalties which could be as high as double-digit on certain future sales of royalty-bearing products.
In addition, Evotec agreed to share portions of the payments with Roche, which originally discovered the molecules. Evotec developed from discovery stages through to clinical studies, then entered in to a Phase II clinical development accord with Roche in patients with treatment-resistant depression. That collaboration was terminated in 2011, with Evotec retaining rights to the portfolio of compounds later licensed to Janssen.
As a result of the development setback, Evotec cut its revenue forecast for this year between 6.7 and 14%. The company now says it expects to generate between €84 million ($115 million) and €86 million ($118 million) in annual revenues, down from its previous range of between €86 million ($118 million) and €100 million ($137.4 million).
Evotec insisted, however, that its operating results “before impairment and changes in contingent consideration” would finish 2013 in the black, with more than €90 million ($124 million) cash liquidity available, a number it did not change.
NMDA receptors are involved in the pathology of depression and other CNS diseases such as Alzheimer’s disease, Parkinson’s disease, neuropathic pain, and epilepsy. The companies reasoned that when NMDA receptor overactivation is reduced in these conditions with an “antagonist,” disease symptoms are reduced. But while 20 years of studies have indicated a potential for NMDA receptor antagonists in the treatment of these diseases, clinical development of nonselective antagonists has been limited by unfavorable side-effects, such as hallucinations.