Chroma Therapeutics announced an option-based drug discovery and development deal on June 23 with GlaxoSmithKline, in conjunction with a £15 million ($24.5 million) Series D financing. Glaxo also participated in the fundraising, but its shareholding remains "well below 10 percent," according to Chroma chief executive Ian Nicholson.
Further terms weren't disclosed, beyond the $1 billion 'biodollars' figure Chroma cited in a press release--a figure that is likely overstated (1 see 'When is A Billion Dollars Not a Billion Dollars,' The IN VIVO blog, June 23, 2009). But Chroma describes the up-front cash payment as 'significant' and will receive milestones, option-fees and tiered royalties based on compounds arising from the collaboration.
Chroma will use its macrophage-targeting technology to identify four small molecules, mainly for inflammatory and auto-immune disease indications, although the deal covers other indications as well, according to Nicholson. The biotech will take these compounds through proof of concept, at which point Glaxo can exercise its option to take an exclusive worldwide license.
Earlier this month, Glaxo signed a similar deal with Concert Pharmaceuticals around three preclinical candidates in which the Big Pharma paid $18.3 million up front in cash and took a $16.7 million equity stake. (2 See 'The Pink Sheet' DAILY, Jun 2, 2009).
Cheaper, Safer Small-Molecule Alternatives to Anti-TNFs?
Chroma's macrophage-targeting technology involves linking amino-acid ester motifs onto existing small molecules so they can selectively target macrophages and other specific cells, such as macrocytes, which are involved in the inflammatory disease process.
According to Nicholson, the technology--known as 'Esterase Sensitive Motif' (ESM)--has the potential, in diseases such as rheumatoid arthritis or Crohn's disease, to deliver "small molecule replacements for biologics like anti-TNFs or IL-6," with equivalent efficacy to such treatments, but "without the side-effect profile."
That's because of their selective ability to hit macrophages only, rather than the systemic elements of the immune system--such as circulating T-cells or B-cells. "Antibodies are fairly blunt instruments" in comparison, says Nicholson. Yet, he insists, animal models of RA prove that targeting macrophages is quite enough to elicit a potent biological effect.
Glaxo should be reassured, according to Nicholson, that Chroma's technology works in man, since the biotech's lead macrophage-targeting compound, an HDAC-inhibitor, is in Phase I trials in oncology. This same compound for the inflammatory diseases indication is one of the four programs that Glaxo optioned.
The potential drug profile that Chroma hopes its technology can create--oral, once-daily therapies with half-lives of 15-25 hours that are just as effective as certain biologics but likely far cheaper (and thus more reimbursable)--helps explain why Glaxo wasn't the only suitor. But this Big Pharma "secured the deal in advance of the others by being quick on its feet," says Nicholson.
Option Deals the Only Option
Not that there was apparently much room for negotiation on the overall deal structure. Option-based deal structures such as this, in which the pharma partner pays an upfront fee for the right to fully license a program (or several programs) at a later date - once proof-of-concept data is available - have become a Glaxo hallmark.
Such deals allow the Big Pharma to hedge financial and clinical risk while demonstrating its interest in particular assets and preventing competitors from getting in first.
Nicholson said Chroma fully expected such a deal structure to be the only one on the table. "We entered into negotiations knowing that this was the over-arching structure, and that we had to work within that framework," he told The Pink Sheet DAILY.
The deal was struck with the European arm of Glaxo's Center of Excellence for External Drug Discovery (CEEDD), whose sole focus is to secure external R&D assets. The CEEDD is usually involved in broad, platform-technology focused deals such as this, which potentially cover a wide range of therapeutic areas.
An important point of negotiation in option-based deals is agreeing and defining when the option can be exercised. One partner's definition of 'proof-of-concept' may be widely different from the other's, which is why "we made sure it was as unambiguous as possible," says Nicholson, with a "detailed scientific description" of what data should be available for Glaxo to make its call.
Meanwhile, although Chroma is running R&D until proof-of-concept (or sooner, if Glaxo chooses to opt in earlier), the partners have set up a joint steering committee overseeing R&D, allowing Glaxo to advise and influence compound development.
Chroma Keeps Oncology Assets
This deal provides important validation of Chroma's technology, and a boost to a sector where good news has been disappointingly rare. (3 See 'The Pink Sheet' DAILY, Jun 5, 2009) Chroma is seen as among the UK's most promising biotechs, not least thanks to its seasoned management, several members of which came from the once- UK flagship Celltech prior to its May 2004 acquisition by UCB SA. (4 See 'The Pink Sheet' DAILY, May 24, 2004) Nicholson was head of business development at Celltech; chief financial officer Richard Bungay was head of strategic planning and M&A, and chief medical officer Leon Hooftman was head of clinical development.
The Series D financing was supported by existing investors Abingworth Management, Essex Woodlands Healthcare Ventures, Gilde Healthcare, Nomura Phase4 Ventures and The Wellcome Trust as well as GSK. The money will be used to progress the lead compound, tosedostat, which is an aminopeptidase inhibitor in-licensed from compatriot Vernalis, into late-stage clinical studies in cancer. The company will also to move the macrophage-targeted HDAC inhibitor program towards clinical proof of concept, which will be aimed at cancer as well.
Today's deal with GSK doesn't impact the oncology portfolio at all, Nicholson notes. The two clinical programs, plus four further targeted oncology programs in pre-clinical, "stay with us," he asserts.
Chroma's last fundraising was a £30 million ($53 million) Series C led by Nomura Phase4 in April 2006.
- Melanie Senior (m.senior @elsevier.com)
This article is reprinted from "The Pink Sheet" DAILY –June 23, 2009
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