Shares in Italy's Newron Pharmaceuticals have taken a tumble this morning after its proposed merger with Biotie Therapies Corp was called off by the Finnish firm.

The firms announced plans to merge a month ago but the deal has gone up in smoke, prompted by the decision of Merck Serono last week to return the full global rights to investigational Parkinson's disease drug safinamide to Newron. The drug is in Phase III but Merck believes "safinamide has a more limited market potential than originally anticipated".

Biotie says that the return of rights from Merck "constitutes a material adverse effect", giving the company the right to terminate the merger. As a result, the Turku-based firm will also receive a break-up fee of 1.5 million euros from Newron.

Economics of deal 'changed completely'

Timo Veromaa, Biotie's chief executive, told PharmaTimes World News that once Merck pulled out, "the economics of the deal changed completely". His firm had entered into the merger plans on the basis of getting steady revenue streams and royalties from a major pharma player, without Biotie having to pay the considerable development costs needed to progress safinamide. 

With Merck no longer on the scene, any milestones "vanished", Mr Veromaa noted. However he has not discounted negotiating again with Newron on different terms but the proposed deal was a European Union cross-border merger, the structure of which could not be changed, hence Biotie's decision to pull out. "We now need to wait for the dust to settle," he added, saying that the company is also looking at other growth opportunities.

Newron is putting a brave face on the news and said regaining the rights to safinamide "opens to the company substantial opportunities to create value for its shareholders". It has hired consultants JSB Partners to help study the alternatives.

Chief executive Luca Benatti, said the firm now has "the opportunity to pursue all strategic options". Newron believes the registration dossier will be ready for submission to health authorities by the end of 2012 and he said that "to companies with commercial capabilities, this offers an extremely attractive opportunity in a focused specialist market”.

Shares in Newron, which is listed on the Zurich stock exchange, were down 6% to 3.94 francs at 10.40am (UK time).