Forest Laboratories acquires additional rights to NXL 104 beta-lactamase inhibitor

Forest Laboratories (NYSE:FRX) announced today its agreement to acquire additional rights to NXL 104, which amends the terms of its prior agreement with Novexel covering the combination of NXL 104 with ceftaroline and adds additional rights to the combination of ceftazidime and NXL 104, through a transaction with AstraZeneca executed immediately following AstraZeneca’s announced acquisition of Novexel, S.A.

“Building AstraZeneca’s anti-infective portfolio has become a strategic priority as antibiotic-resistant bacteria pose a growing threat to human health”

NXL 104 inhibits bacterial enzymes called beta-lactamases that break down beta-lactam antibiotics including cephalosporins. It is designed to be co-administered with select antibiotics to enhance their spectrum of activity and counteract bacterial resistance.

In January 2008, Forest licensed from Novexel, North American rights to NXL 104 in combination with ceftaroline, and obtained a right of first negotiation in North America to a ceftazidime/NXL 104 combination.

In the current transaction with AstraZeneca, Forest has significantly expanded its overall interests in NXL 104, acquiring full worldwide rights to the ceftaroline/NXL 104 combination while simultaneously licensing rights outside the United States, Canada and Japan to AstraZeneca. Forest also will receive royalties on AstraZeneca’s international sales of the ceftaroline/NXL 104 combination. The transaction eliminates all future milestone payments (totaling €75 million) and royalty payments of approximately 10% on sales of ceftaroline/NXL 104 which Forest would have owed Novexel under the original license. In addition, Forest gains co-development and full commercialization rights in the United States and Canada to the ceftazidime/NXL 104 combination currently under development by Novexel, and in addition, receives commercialization right to any other combinations involving NXL 104.

Under a separate agreement, Forest and AstraZeneca have agreed that following completion of the acquisition, Forest will pay Novexel, then an AstraZeneca group company, $210 million in consideration for the additional rights to NXL 104 being acquired, which represents approximately 50% of AstraZeneca’s acquisition and related transaction costs. Forest may also be obligated to pay certain additional costs and half of certain future development milestone payments in connection with the transaction. Forest will share with AstraZeneca, the costs of worldwide development of the ceftaroline and ceftazidime combinations with NXL 104. The transaction is expected to close in Forest’s fiscal fourth quarter following satisfaction of customary closing conditions, including the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Howard Solomon, Chairman and Chief Executive Officer of Forest Laboratories said, “This transaction broadens Forest’s antibiotic product portfolio which will now include drugs principally active against both gram-positive pathogens (ceftaroline/NXL 104) and gram negative pathogens (ceftazidime/NXL 104), to address virtually the entire spectrum of infectious bacterial pathogens and to bring more useful antibacterial therapies to patients suffering from serious and potentially life-threatening infections. We are also delighted to expand our existing relationship with AstraZeneca and to collaborate with them on the development and commercialization of these important antibiotics.”

“Building AstraZeneca’s anti-infective portfolio has become a strategic priority as antibiotic-resistant bacteria pose a growing threat to human health,” said Anders Ekblom, AstraZeneca Executive Vice-President of Development. “The innovative structure of this agreement allows us to build on our existing collaboration with Forest to create value, share costs, and reduce exposure to risk while developing two novel antibiotic combinations that address a growing problem for clinicians and patients. Utilising Novexel’s NXL 104, these combinations have the potential to outwit bacteria that would otherwise be resistant to antibiotics.”

Forest is developing the ceftaroline/NXL 104 combination to treat hospital infections caused by gram-positive pathogens including methicillin-resistant Staphylococcus aureus (“MRSA”) and multidrug-resistant Streptococcus pneumoniae (“MDRSP”) as well as extended-spectrum beta-lactamase (“ESBL”)-producing gram-negative organisms. Forest is currently studying the ceftaroline/NXL 104 combination in Phase I studies.

The ceftazidime/NXL 104 combination is being developed to treat hospital infections that are caused by gram-negative bacteria, including Pseudomonas aeruginosa, a pathogen resistant to many currently used antibiotics. The ceftazidime/NXL 104 combination is currently being studied in a Phase II complicated intra-abdominal infections (“cIAI”) study and a Phase II complicated urinary tract infections (“cUTI”) study, both in hospitalized patients.

A composition of matter patent which claims NXL 104 provides protection for the combination of NXL 104 with ceftaroline, ceftazidime and any other agents until 2022, subject to possible patent term extension.