CoCensys’ Marketing Unit Sold for $9 Million

CoCensys Inc., abandoning its unsuccessful effort to generate dollars to fund its research by selling other companies’ drugs, said Thursday that it has sold its pharmaceutical sales and marketing division to Watson Pharmaceuticals Inc. for about $9 million.

Irvine-based CoCensys will refocus on developing drugs to treat neurological and psychiatric disorders. Like most biotech companies, CoCensys struggles with limited operating cash. And officials said the company didn’t want to invest the millions necessary to make the sales effort successful when the money would be put to better use in development of its own proprietary products.

In Nasdaq trading Thursday, the company’s stock slumped 56 cents a share to close at $5.38.

Watson paid $6 million at the closing of the deal and will pay the remainder over time.

CoCensys said the sale will free up about $3 million a year for investment in research and product development.

F. Richard Nichol, the company’s president and chief executive, said the sales and marketing division had trouble getting big enough to throw off cash because its products were also-run drugs handed off to CoCensys for distribution. When newer drugs grabbed the market, CoCensys salespeople were stuck trying to market stuff that the market no longer wanted.

When the number of products dwindled to one, said Nichol, “it didn’t make sense for us to spend $20 million to $25 million just to keep the sales division going.”

As of June 30, the company had about $17 million in cash left. The company is awaiting results of tests on products and hopes to line up corporate partners to invest in their commercialization.

Assuming it comes up with marketable drugs, Nichol said, CoCensys may arrange to sell products through Watson’s sales force. Under the agreement, Watson gets the right to hire about 70 sales and marketing personnel employed by the division and other assets.