Merck & Co. has extended a nearly year-old partnership with Bionomics, with the pharma giant agreeing to join the Australian biotech in developing new compounds for Alzheimer’s disease and other disorders of the central nervous system. The deal could net Bionomics up to $526 million.

The companies agreed to a research collaboration, under which Bionomics licensed its BNC375 program to Merck.

BNC375 is designed to work by targeting the α7 nicotinic acetyl choline receptor, a receptor that is critical to thought processes. Modulators of the “Alpha 7” receptor, for example, may improve memory and reduce brain inflammation in Alzheimer’s, according to Bionomics.

BNC375 and related compounds have shown potent in vivo memory-enhancing properties in animal cognitive impairment models—without having shown any side effects to date, Bionomics said. BNC375 has potential application in Parkinson’s disease, multiple sclerosis, schizophrenia and attention deficit hyperactivity disorder (ADHD), in addition to Alzheimer’s and Parkinson’s disease.

The collaboration will apply Bionomics’ ionX® drug discovery platform, a set of technologies designed to identify drugs targeting ion channels for diseases of the central nervous system. IonX® includes systems for high throughput electrophysiology for early, high-content evaluation of drug hits. The platform further validates and optimizes advanced leads through a suite of model systems including EpiMouse™, a novel transgenic mouse model of epilepsy.

Merck agreed to fund all research and development, including clinical development, as well as oversee worldwide commercialization of any products from the collaboration.

In return, Merck agreed to pay Bionomics $20 million upfront, and up to $506 million in payments tied to unspecified research and clinical development milestones. Bionomics is also eligible for undisclosed royalties on product sales.

“We believe that the combination of Bionomics’ innovative approach and technologies, within its ionX platform, has the potential to rapidly advance new treatments,” Deborah Rathjen, Ph.D., FTSE, Bionomics’ CEO and managing director, said in a statement.

In July 2013, Merck agreed to pay Bionomics up to $172 million in option exercise fees and payments tied to development and regulatory milestones, under a research collaboration intended to discover and develop new small molecule candidates for treating neuropathic pain and other chronic pain. The pain collaboration uses ionX as well as MultiCore®, a diversity-oriented chemistry platform for the discovery of small molecule drugs.

In addition to ionX and MultiCore, Bionomics has two other tech platforms: Angene®, a drug discovery platform that incorporates genomics tools to identify and validate novel angiogenesis targets; and CSC Rx Discovery™, which is designed to identify antibody and small molecule therapeutics that inhibit the growth of cancer stem cells.

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