Novartis (NYSE:NVS), a Swiss drug manufacturer, said it is buying Spinifex Pharmaceuticals, a U.S.-based biotechnology company that specializes in developing treatments for chronic pain.
Spinifex said in a statement today that Basel-based Novartis was paying $200 million upfront and Spinifex shareholders could get further payments based on clinical development and regulatory milestones.
Future payments may reach an additional $500 million, the Australian Financial Review reported, without saying where it got the information.
The privately held Spinifex has its headquarters in Stamford, Connecticut, and an office in Melbourne, Australia.
The transaction is expected to close in the second half of this year, pending regulatory approval.
The deal gives Novartis access to Spinifex's experimental neuropathic pain drug EMA401, which showed positive mid-stage Phase II clinical trial results in the treating post-herpetic neuralgia (PHN), a painful condition some people get after shingles.
Neuropathic pain is a chronic condition with high unmet medical need - about 40 percent of patients do not respond to current first line treatments.
"EMA401 could provide a novel, differentiated treatment approach to provide relief for patients and healthcare providers worldwide," said David Epstein, who runs Novartis Pharmaceuticals.
The acquisition is small by the standards of Novartis but it highlights the Swiss group's drive to expand its pipeline of new medicines at a time of growing investor confidence in the potential of new medicines across the drugs sector.
Established in 2005, Spinifex is backed by venture capital groups including Novo A/S, Canaan Partners, GBS Venture Partners, Brandon Capital Partners, Uniseed and the University of Queensland.
Deutsche Bank AG is the financial adviser to Spinifex on the deal, and Goodwin Procter LLP is serving as legal counsel.
ADRs of Novartis were down 0.2 percent at $99.71 at 10:08 a.m. in New York.