Allergan bets $50M on a dry eye drug as it touts its commitment to R&D

Allergan CEO Brent Saunders

Allergan ($AGN) expanded its pipeline with a $50 million deal to bring in a late-stage treatment for dry eye as the company works to reaffirm its commitment to R&D in the face of industrywide scrutiny.

Under an agreement with Canada's Mimetogen, Allergan is handing over $50 million up front and promising undisclosed payments down the road in exchange for the rights to tavilermide, a topical treatment now in Phase III. Allergan has agreed to fund the drug's clinical development from here on out, taking the reins on a pair of Phase III trials currently enrolling.

Tavilermide is a small-molecule therapy designed to bolster a protein called TrkA, which regulates nerve growth, and thereby strengthen the ocular tear film. One form of dry eye results from an inflammation-related breakdown of that film, leading to irritating corneal dry spots and impaired vision, the company said. In Phase II, tavilermide bested placebo in reducing patient-reported blurry vision and other symptoms of the disease, Allergan said, a benefit the company hopes to replicate in late-stage trials.

Allergan is touting the deal as evidence of its seriousness in drug development. The company, which tends to eschew early-stage research, has recently been lumped in with the controversial Valeant Pharmaceuticals ($VRX) among drugmakers more interested in buying commercial assets than developing drugs of their own, leading Allergan to go on the offensive and herald its $1.7 billion projected R&D spend for 2015. The company has more than 70 mid- to late-stage programs in development, it said Wednesday, focused on gastroenterology, CNS diseases and eye care, among other areas.

Under CEO Brent Saunders, Allergan has taken a tack it calls "growth pharma," acquiring drugs that have already crossed the proof-of-concept stage and then shepherding them to market. Over the past year, the company bought up Kythera for its now-approved chin fat treatment, Naurex for its late-stage depression drug and the rights to some Phase II migraine therapies from Merck ($MRK). The over-arching idea, Saunders has said, is to rely on biotech and academia for drug discovery, a discipline that has long troubled Big Pharma, and then stepping in with a check to get a project across the goal line.

"We bring these programs into our best-in-class product development and commercialization platform to build a sustainable R&D portfolio that enables Allergan to continue to be a leader in growth pharma," Saunders said in a statement. "Through our open science model, we seek to  continue to drive strong R&D productivity by delivering innovative therapies that create long-term shared value for Allergan, for customers and for patients."

Saunders' model has thus far been a hit with investors, as Allergan's shares are up more than 25% since the former Actavis agreed to buy the company last year. And so-called growth pharma has apparently won over the U.S.'s largest drugmaker, as Pfizer ($PFE), desperate for a tax-saving deal, confirmed approaching Allergan about a potential merger last month. The pair are now in "preliminary friendly discussions," Allergan said, and many analysts believe a deal may come by Thanksgiving.

- read the tavilermide statement
- here's the pipeline release (PDF)