Senior Staff Writer

Adding a new Alzheimer's disease platform to its portfolio, Athenagen Inc. agreed to merge with Zapaq Inc., a 5-year-old company focused on beta-secretase inhibitors.

Both companies are privately held, and the value of the transaction was not disclosed.

Based in Oklahoma City, Zapaq was founded in 2001 by Jordan Tang, of the Oklahoma Medical Research Foundation, and Arun Ghosh, a professor at Purdue University.

Tang discovered the aspartic protease beta-secretase in 2000, and details of the discovery then were published in Proceedings of the National Academy of Sciences. Beta-secretase is an enzyme critical to beta amyloid production, which has been linked to Alzheimer's disease.

Athenagen, of South San Francisco, already has an Alzheimer's disease candidate set to enter a Phase II trial this year. The compound, GTS-21, is a small-molecule, orally active and selective alpha-7 nicotinic acetylcholine agonist that has demonstrated memory and cognition enhancement activity in humans.

"The merger with Zapaq gives us access to a second blockbuster opportunity, the beta-secretase inhibitor program for Alzheimer's," said Scott Harkonen, Athenagen's president and CEO. "Zapaq has a very competitive, cutting-edge program."

Harkonen will serve as president and CEO of the combined company, while Robert McNeil will serve as executive chairman. McNeill is with Sanderling Ventures, of San Mateo, Calif., the lead investor in both companies. Tang and Ghosh will continue to serve as consultants to the merged company, as will Athenagen co-founder and consultant John Cooke.

The combined company will be based in South San Francisco, with additional research operations in Oklahoma City, where Zapaq's 15 employees work.

Over the last few years, Zapaq scientists have worked with Tang and Ghosh to characterize beta-secretase and its role in Alzheimer's disease, thereby developing a portfolio of drug candidates that inhibit the enzyme. The lead product is set to enter the clinic in 2007, Harkonen said.

"What's unique about these drug candidates is that they may be the first drugs to alter the course of Alzheimer's disease either by slowing down or preventing progression of the disease," he told BioWorld Today. "They'd be the first drugs that are disease modifying."

Several of the compounds have shown activity in animal models of Alzheimer's disease.

By merging with Athenagen, Zapaq gains access to development and clinical trial expertise. In addition to entering a Phase II trial in Alzheimer's disease, Athenagen's GTS-21 is in an ongoing Phase II study in patients with schizophrenia.

The company acquired the product in April through its buyout of Osprey Pharmaceutical Co., of Ponte Vedra Beach, Fla.

"The Phase II will be completed by the end of this year," Harkonen said, "and based on those results, we'll evaluate whether it's ready to move directly into Phase III [in schizophrenia] or not."

The company, founded in 2004, also expects to move ATG003 into clinical trials this summer as an eye drop formulation of mecamylamine to treat age-related macular degeneration. It has shown efficacy in animal models and could offer an alternative to South San Francisco-based Genentech Inc.'s Lucentis, which gained approval earlier this month.

"People are excited about [Lucentis] being approved, but it's so invasive with these intraocular injections," Harkonen said.

A third product in Athenagen's pipeline is ATG002, which appears to promote angiogenesis and tissue repair in wound-healing models. An investigational new drug application to test the drug as a treatment for diabetic foot ulcers has been filed, and the company is seeking a development partner.

Athenagen has a different partnering strategy for its other products.

"Our intent is to hang onto the drugs, the value of the drugs, for Alzheimer's disease, and then also topical eye drug therapies for macular degeneration," Harkonen said.

The AMD market could be tackled with Athenagen's own sales force, but the Alzheimer's disease market is large and the company expects to secure a commercialization partner once it takes the lead compounds through development as far as possible.

If a beta-secretase inhibitor makes its way to an FDA approval, Athenagen's merger with Zapaq would prove to be a wise business transaction. The market potential for an Alzheimer's disease-modifying drug has been "estimated to be of the scale of the statin drugs to prevent cardiovascular disease," Harkonen said. "It would be a multibillion-dollar market opportunity."

Aside from Sanderling Ventures, other investors in Zapaq include Astellas Ventures; and in Athenagen include Charter Life Sciences and Life Science Angels, both of Palo Alto, Calif. The merger is expected to be completed by the end of August.