Xenon frees itself of some XEN1101 milestone obligations

money
Xenon’s decision will only pay off if it hits some of its regulatory or sales milestones. (pasja1000)

Xenon has struck a deal with Bausch Health to free itself from milestone and royalty obligations related to epilepsy prospect XEN1101. The agreement sees Xenon pay $6 million upfront to avoid having to hand over up to $40 million in milestones plus royalties down the line.

Canada-based Xenon took on the financial ties to Bausch Health, the company formerly known as Valeant, when it acquired Kv7 potassium channel opener XEN1101 from 1st Order Pharmaceuticals last year. 1st Order made the milestone commitments to Bausch Health when it bought the drug and passed them onto Xenon when it offloaded the asset.

The sequence of events left Xenon on the hook for milestone and royalty payments to Bausch Health and 1st Order. Having crunched the numbers, Xenon has decided it is best served by paying Bausch Health $6 million to end their relationship.

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In doing so, Xenon has eliminated the possibility that it will have to pay Bausch Health as much as $39.6 million in milestones, plus mid- to high single-digit royalties. Xenon was some way off having to pay the bulk of the milestones. Clinical development milestones account for $0.5 million of the total. Regulatory milestones were worth $7 million. The remaining $32.1 million was tied to sales goals.

The upshot is Xenon’s decision to exit its relationship with Bausch Health will only pay off if it hits some of the regulatory or sales milestones. Xenon’s willingness to pay now to free itself of financial obligations it may never need to face reflects its growing confidence in XEN1101.

“Based on our exciting progress and the strength of the positive data from the XEN1101 phase 1 clinical trial and phase 1b transcranial magnetic stimulation study, we negotiated a one-time payment that terminates all of our future milestone and royalty payment obligations to Bausch Health. This transaction underscores our confidence in the potential of XEN1101 as a treatment of epilepsy and possibly other neurological indications and further solidifies our proprietary pipeline,” Xenon CEO Simon Pimstone said in a statement.

Xenon is still on the hook for up to $8 million in milestone payments to 1st Order.