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Vernalis and GSK sign risk-sharing deal

Published on 07/08/09 at 05:31pm

Vernalis and GlaxoSmithKline have joined forces to work on a cancer treatment in a deal which could be worth more than $200 million.

The deal is structured as a risk-sharing agreement, with Vernalis responsible for drug discovery activities and GSK for pre-clinical development. Upon IND filing (as the drug enters pre-clinical development) GSK will have the option to license all collaboration compounds and, if this is exercised, will then take on all future development and marketing activities.

The collaboration, option and license agreement relates to an undisclosed oncology target.

This latest agreement will see GSK paying Vernalis $6 million, which includes the purchase of $3 million in Vernalis shares.

The new deal is the second such tie-up for Vernalis this year. In May Servier, France's largest privately-owned pharma company, signed a new three-year agreement with the UK biotech, also focused on oncology.

"Earlier this year we set ourselves the goal of securing research collaborations to fund a substantial proportion of our research activities. In May we announced a second collaboration with Servier and today we are delighted to announce this licensing agreement with GSK," said Ian Garland, chief executive.

"The risk sharing structure of today's deal allows us to achieve our research funding goal but to also retain a significant upside from successful development of this novel Vernalis oncology programme. We are delighted to be working alongside GSK and to have another world leading pharmaceutical company endorse our technology and the quality of our work."

The company could earn up-front and potential milestone payments of $200 million plus double-digit royalties of sales of a subsequent cancer treatment.

Further royalties could arise if indications outside of oncology are discovered.

"The risk sharing structure of today's deal allows us to achieve our research funding goal but to also retain a significant upside from successful development of this novel Vernalis oncology programme," Garland added.

GSK will have the option to license all compounds found and would then be responsible for their development and commercialisation.

Vernalis has agreements with a number of other pharma companies on potential drug development.

For example, Novartis has marketing rights to two cancer candidates currently in phase I, while Biogen Idec has a similar arrangement on a phase II Parkinson's disease candidate.

Vernalis has a total of seven products in clinical development, including further treatments for Parkinson's disease and a neuropathic pain candidate both of which are in phase II.

Company chairman Peter Fellner said: "The successful equity fundraising, that closed in May, provides cash which will enable further advances in Vernalis' broad clinical pipeline."

Vernalis has just released half-year results in which it made an operating loss of £5.3 million on revenue of £5.6 million.

However, the company also racked up £27.8 million in cash, with another $7.5 million coming in since the end of June from the Novartis and GSK deals.

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