July 1 (Bloomberg) -- Biogen Idec Inc., the world’s largest maker of drugs for multiple sclerosis, will pay as much as $510 million for rights to market Acorda Therapeutics Inc.’s experimental MS pill outside the U.S.

Acorda will receive an upfront payment of $110 million and as much as $400 million for meeting development and sales goals, the companies said today. The drug, Fampridine SR, designed to improve walking ability in patients with MS, will be sold by Acorda in the U.S. It may win clearance for U.S. sale this year.

Biogen, based in Cambridge, Massachusetts, is racing Merck KGaA and Novartis AG to market the first pill for MS, a debilitating nervous-system disease currently managed by injected drugs that generate $6 billion a year worldwide. Acorda, based in Hawthorne, New York, said in February it would need to sell rights to Fampridine to pay for operating beyond next year.

“Biogen was always the most natural longer-term partner for Fampridine SR, and the current deal obviously does not preclude future strategic options between Biogen and Acorda,” Geoff Meacham, an analyst with JPMorgan Securities in New York, said today in a research note. “Some investors were looking for a near-term acquisition and therefore would expect near-term trading to be choppy.”

Acorda plunged 15 percent, or $4.20, to $23.99 at 4 p.m. New York time in Nasdaq Stock Market composite trading. Biogen rose $1.62, or 3.6 percent, to $46.77.

Avonex, Tysabri

Biogen’s top-selling MS medication, Avonex, generated $2.2 billion last year. Biogen’s fastest-growing product is the MS drug Tysabri, which generated 2008 sales of $589 million for the company. The company markets Tysabri with Dublin-based Elan Corp. Biogen’s oral MS drug, BG-12, is in final human tests.

About 2.5 million people worldwide have MS, including 400,000 in the U.S. It causes loss of muscle control, strength, sensation and vision, ultimately leading to paralysis in the most severe cases.

The disease damages the central nervous system, which consists of the brain, spinal cord and optic nerves. Myelin, the fatty tissue surrounding and protecting nerve fibers, is lost, inhibiting the ability of the fibers to conduct electrical impulses. The exact cause of MS isn’t known.

Existing treatments for MS are designed to suppress the immune system’s assault on myelin, preventing further erosion that worsens symptoms. Fampridine is the first in a new family of medicines designed to restore nerve signals after myelin is lost.

Walking Drug

“Fampridine, if approved, would represent the first therapy specifically targeted toward improving walking function in MS,” Chris Raymond, an analyst with Robert W. Baird & Co. in New York, said in a May 6 note to clients. He projected 2013 sales of $302 million.

Acorda said May 6 that the U.S. Food and Drug Administration would consider Fampridine under a “priority review” process that typically takes six months, compared with 10 months for standard applications.

“The partnership validates a bullish view on Fampridine’s regulatory and commercial prospects,” Meacham said today in his research note. Meacham said in May the medicine may cost about $8,000 a year.

Acorda’s net loss widened to $74.3 million last year, from $38 million in 2007, as research costs increased during final trials for Fampridine. The company’s only drug, Zanaflex, a muscle relaxer for MS, generated $53.4 million last year.

Speedier Walking

In 25-foot walking tests, 43 percent of patients taking Fampridine SR had consistent improvement in speed, compared with 9.3 percent on placebo, Acorda said in a June 2, 2008, statement announcing results of one trial used to seek FDA approval.

The company-funded study enrolled 240 patients diagnosed with MS and some degree of walking disability at 39 sites in the U.S. and Canada. Patients continued to take their usual MS medications, including Avonex and Tysabri.

The most common side effects with Fampridine, compared with placebo, were urinary tract infections, falls, insomnia, headache, dizziness, nausea, and upper respiratory infections, the study found.

Elan, Ireland’s biggest drugmaker, will manufacture Fampridine SR and receive royalties under a prior licensing agreement with Acorda. As part of the new agreement today with Biogen, Acorda will pay Elan 7 percent of the total up-front and milestone fees it receives from Biogen.

Acorda had multiple bidders for the marketing rights to Fampridine, Jeffrey Macdonald, a company spokesman, said today in an interview. A standstill agreement with Biogen limits the potential for Acorda to be acquired by its new partner, Macdonald said.

To contact the reporter on this story: Lisa Rapaport in New York at lrapaport1@bloomberg.net

Last Updated: July 1, 2009 16:11 EDT