Northwestern Spin-off Naurex to be Acquired by Allergan

Northwestern University spin-off Naurex Inc. has entered into a transaction with large pharmaceutical company Allergan, paving the way for its promising antidepressant programs to proceed into late-stage clinical trial and eventually enter the market.

Under the terms of the all-cash transaction, Allergan will acquire Naurex for a $560 million upfront payment of net cash acquired, as well as potential success-based research and development and commercial milestone payments.

The transaction represents the culmination of more than 30 years of neuropharmaceutical development in the laboratory of Joseph Moskal, distinguished research professor of biomedical engineering at Northwestern University’s McCormick School of Engineering, and seven years of business development among a team with many Northwestern Engineering connections.

The spin-off company will allow Moskal and his colleagues to continue discovering and developing novel modulators of the NMDA receptor and innovating with that technology to discover new therapies for brain and nervous system disorders.

“It feels really good to get Naurex to the point where the innovation and value of our lead antidepressant programs are recognized by a company with Allergan’s development and commercial expertise in the field,” Moskal said. “And it’s the natural time. We finished proving these molecules have dramatic potential through much of the early clinical work. Now it’s time to hand these important therapies to a capable party with the necessary large resources — and to focus on repeating this innovation with our proven team and technology.”

A New Path for Treatment

According to the National Institute of Mental Health (NIMH), major depression is the second leading cause of disability in US adults, affecting as much as 10 percent of the population.

Naurex’s fast-acting drug for major depression disorder, called rapastinel (previously named GLYX-13), has shown unrivaled success in Phase I and II clinical trials. Not only does the drug take effect within hours, but one dose can last for one to two weeks without any known side effects. Last year, the intravenous injectable drug received the Food and Drug Administration’s highly coveted fast-track designation, a classification given only to drugs that demonstrate superior effectiveness and safety.

“There are about 60 people from the Phase II trial who are still taking rapastinel,” said Moskal, Naurex’s founder and chief scientific officer. “The fact that these people are willing to go to the doctor every week and take an injection is amazing. That speaks for itself.”

Rapastinel is currently in Phase III clinical trials. The company’s second antidepressant drug, NRX-1074, currently in Phase II clinical trials, has shown similar success and will be available in an orally deliverable pill. Because they work differently than popular antidepressants, rapastinel and NRX-1074 could provide much-needed relief for 30 to 40 percent of patients who are unresponsive to available medications.

“Patients often go from one therapy to another to another,” said Naurex president and CEO Norbert Riedel. “One treatment might work for a short time, but then they have to start all over. Meanwhile, they are burdened with all sorts of side effects that interfere with their quality of life.”

Rapastinel has showed rapid, substantial, and sustained effects for those with even hard-to-treat symptoms. The promising drug works by targeting the brain’s NMDA receptors, which are involved in learning and memory mechanisms. This is a markedly different approach from current, widely used antidepressants that instead increase serotonin levels. While rapastinel is not the only drug to target the NMDA receptors, it is potentially the safest. None of the clinical trial subjects thus far have experienced serious adverse side effects related to the drug. Other drugs on the market and in development that target NMDA receptors can cause hallucinations, nausea, insomnia, and even psychotic episodes. Moskal posits that rapastinel does not block the receptor’s ion channel, which may be the reason it doesn’t have the same side effects.

“Fundamentally, we have found the key to unlocking the way in which this receptor needs to be modulated to restore normal brain function,” Moskal said.

Modest Beginnings

The work that eventually led to rapastinel began back in 1983. Moskal remembers wearing jeans and sneakers as a senior staff fellow at the NIMH’s Intramural Research Program, where he developed molecules and monoclonal antibodies to use as probes to understand pathways of learning and memory. After injecting the antibodies into an animal model, Moskal experienced a major breakthrough in his research. The animal models acted in exactly the way he predicted.

“I wanted to see if the antibody would stimulate learning and memory, and it did,” Moskal said. “The animal learned twice as fast as the controls. There was a real, functioning mammal that was truly learning.”

Moskal joined Northwestern University in 1990 and founded the Falk Center for Molecular Therapeutics with the goal to translate discoveries into clinically useful compounds. It was there that he converted the large monoclonal antibodies into small molecules that he suspected might have therapeutic potential. GLYX-13, now called rapastinel, was one of them.

“Joe didn’t approach his work thinking ‘I want to develop the next multi-million dollar drug,’” said Bill Gantz, the executive chairman of the board at Naurex. “He wanted to understand cognition. He was coming at it from a unique perspective.”

With the goal of bringing his therapeutics to market, Moskal founded Naurex in late 2006 and started raising meaningful seed funding in 2008. While the company was the fourth to grow out of his research, it was the first to succeed. He credits some of the success to Northwestern’s supportive and innovative environment, which enabled him to work alongside students and world-class researchers while developing a business. But much of the success is owed to Moskal’s unflappable determination and resilience.

“If you’re going to be in this business for 30 or 40 years, you’re going to experience failure,” he said. “But for me, failure never felt like failure. It was just a different kind of data.”

Building the Right Team

In 2011, Naurex raised $18 million in financing, jumpstarting momentum for the company. It attracted Gantz and Riedel, veterans of the pharmaceutical industry and members of Northwestern Engineering’s McCormick Advisory Council. At the time, Gantz was on the board of Adams Street Partners, a private equity firm that invested in Naurex. Riedel was the corporate vice president and chief science and innovation officer at Baxter International, where he developed Baxter Ventures in 2011 with a goal to invest in startups. One of the fund’s first grants went to Naurex.

Believing that Moskal and his team discovered a breakthrough treatment for depression, Gantz and Riedel were motivated to join Naurex because of their faith in the technology. The second factor that attracted them was Moskal. Described by Riedel as “a bundle of energy,” Moskal talks fast and laughs easily. Even at age 65, he shows no signs of stopping.

“He exemplifies academic brilliance,” Riedel said. “But he also gives people an environment where they can flourish. He has passion, perseverance, and an infectious enthusiasm for his work.”

“It can be a challenge to turn research into a fully functioning company,” Gantz said. “But what’s wonderful about Joe is his curiosity. His curiosity extends not only into science but into business and how things work commercially.”

With the right team in place, Naurex became virtually unstoppable. The company has received $163 million of venture funding and investments, with $80 million of the total coming from just one round of financing in November 2014.

“It was one of the largest financings in history for private biotech companies in the United States,” Riedel said. “I’m not aware of any other examples of a university technology commanding that much attention from investors.”

A Bright Future

Moskal has found that the NMDA receptor is not just involved in depression but in many other central nervous system disorders. The new spin-off company will discover and develop other small molecules that modulate the same receptor to treat a wide array of debilitating diseases and disorders of the brain and nervous system. Moskal said these terrible illnesses have few effective treatments and are “ripe” for his compounds.

“Joe’s research has opened a whole universe of brain conditions where the same master switch is either involved in the normal physiology of the brain or involved in helping trigger the disease,” Riedel said. “If we now take a small molecule and administer it to models of many brain and nervous system conditions, we see striking therapeutic benefits in all instances.”

Over the past nine years, Naurex has grown from a small start-up into a highly valuable company with strong interest from both investors and large companies. Moskal and his team are now poised to continue innovating in new disease areas with their spin-off company.

“I’m psyched to ride the next wave,” Moskal said. “I believe that the best is yet to come for our technology and team.”