Three-year deal calls for almost $300 million in commercialization-related milestone fees per product.

NeuroSearch stock rose 7% on the company’s announcement of a three-year drug discovery and development alliance with Janssen Pharmaceutica in the field of central nervous system diseases. Neurosearch is guaranteed to earn €27 million (about $38 million).

This will come in the form of a €5 million up front, €12 million in research funding over the three years, and a guaranteed €10 million equity investment in the company by Janssen. NeuroSearch also has the option to sell another €5 million (roughly $7.04 million) worth of its stock to Janssen before April 2010.  Janssen has an option to the extend the alliance for another two years, in return for additional research funding. For each drug commercialized through the alliance, NeuroSearch could earn another €213 million (about $299.9 million) in milestone payments plus double-digit royalties on sales.

The collaboration will involve NeuroSearch carrying out drug discovery and early development of drug candidates.  Janssen will retain options to license individual compounds and related IP. On exercising a licensing option, Janssen will then take over and finance all subsequent development and commercialization of the relevant product.

The deal follows less than two weeks after NeuroSearch earned €5 million in equity financing from partner GlaxoSmithKline on FDA’s acceptance of NeuroSearch’s filing of an IND for the selective GABAA receptor modulator NSD-721. Initiation of clinical studies will trigger another €4 million milestone payment from GSK. The companies’ drug discovery and development alliance covers a number of compounds and targets and was expanded to include additional compounds in January.

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