Depomed buys a late-stage pain drug and settles its Endo suit in one swipe

Depomed CEO Jim Schoeneck

Depomed ($DEPO) agreed to pay $25 million for the rights to a novel pain treatment from Germany's Grünenthal, signing a deal that will also settle the company's long-running patent lawsuit against Endo Pharmaceuticals ($ENDP).

Under the agreement, Depomed is handing over a one-time cash payment in exchange for the U.S. and Canadian rights to cebranopadol, a pain treatment that targets both the mu-opioid and the nociceptin receptors. Depomed is promising no clinical or regulatory milestone payments to Grünenthal, only royalties on eventual sales. The company said it plans to move its new drug into Phase III trials for chronic lower back pain and other indications in 2017.

The acquisition, expected to close in the fourth quarter, would also button up Depomed's ongoing litigation against Endo, the company said. Depomed has long contended that Endo's Opana ER, formulated by Grünenthal, infringes three of its patents, but under the terms of the cebranopadol deal, Depomed is agreeing to give Endo a license to those disputed patents in the U.S., ending the legal battle.

Cebranopadol has been through 7 Phase II trials in osteoarthritis, peripheral neuropathy and back pain, Depomed said, and the company believes it has potential as a dual-action painkiller that can stack up to traditional opioids with fewer side effects. Depomed said it's on track to hold an end-of-Phase II meeting with the FDA next year, seeking feedback to map out its late-stage path.

Meanwhile, the analgesic-focused company is working to fend off a hostile takeover bid from Horizon Pharma ($HZNP), which is trying to lure Depomed shareholders into accepting roughly $3 billion buyout. Depomed has resolutely claimed the offer undervalues its business.

- read the statement