Pfizer Licenses Medivation Alzheimer's Drug

Updated from 7:48 a.m. EDT.

Medivation(MDVN Quote - Cramer on MDVN - Stock Picks) has landed a monster licensing deal for its experimental Alzheimer's disease drug.

Pfizer(PFE Quote - Cramer on PFE - Stock Picks) will pay $225 million up front to Medivation to gain worldwide marketing rights to Dimebon, the companies announced Wednesday.

Dimebon is currently in a pivotal phase III study enrolling 525 Alzheimer's patients worldwide. If a positive study leads to the drug's approval, Pfizer will pay Medivation another $500 million. Medivation and Pfizer will share development expenses and profits and losses on a 60-40 basis, with Pfizer assuming the larger share of costs and profits and losses.

The partnership also grants Pfizer licensing rights to Dimebon as a treatment for Huntington's disease.

Medivation shares closed Tuesday at $26.03, an all-time high. The stock was soaring in recent trading Wednesday, adding 13% to $29.41.

The cash outlay by Pfizer for partnership rights to Medivation's Dimebon far outstrips the $100 million upfront fee ($350 million total) paid in May by Danish drug firm Lundbeck A/S to Myriad Genetics(MYGN Quote - Cramer on MYGN - Stock Picks) for non-U.S. rights to the latter's Alzheimer's drug Flurizan. That deal went bust for Lundbeck in June, however, when Flurizan's phase III study failed.

Pfizer is clearly hoping for a better outcome with Dimebon because the pharmaceutical giant, like the rest of Big Pharma, is desperate for new blockbuster drugs. Pfizer, in particular, needs another multibillion dollar product to replace the roughly $10 billion a year in revenue generated by its cholesterol drug Lipitor, which faces generic competition in late 2011.

Results from the Dimebon phase III study should be released in 2010. If Dimebon can halt or reverse the loss of mental status and function in Alzheimer's patients, peak sales could match or even surpass that of Lipitor.

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