Staff Writer

With the end of 2005 less than two weeks away, the biggest collaborative biotech deal of the year came in just under the wire.

AtheroGenics Inc. entered a deal Thursday with AstraZeneca plc worth in total a potential $1 billion to develop and commercialize its Phase III-stage atherosclerosis drug, AGI-1067.

"It's a very exciting and important step for our company," said Russell Medford, president and CEO of Atlanta-based AtheroGenics, which completed enrollment last quarter for its multinational 6,000-patient ARISE (Aggressive Reduction of Inflammation Stops Events) trial of AGI-1067 targeting coronary artery disease. Results are expected in the second half of 2006.

According to BioWorld Snapshots, AtheroGenics' deal ranks it above Wilmington, Del.-based Incyte Corp.'s $803 million collaboration with New York-based Pfizer Inc. signed last month to develop Incyte's CCR2 antagonist program in Phase II for rheumatoid arthritis and obesity. Below those two is Fremont, Calif.-based Protein Design Labs Inc.'s agreement with Biogen Idec Inc., of Cambridge, Mass., which could end up providing a total of $800 million to PDL for three Phase II compounds for indications such as multiple sclerosis and autoimmune disorders. (See BioWorld Today, Aug. 4, 2005, and Nov. 22, 2005.)

"By combining with AstraZeneca at this time, we're now in position to optimize the movements and developments of this drug," Medford said, so that upon successful completion of Phase III, AtheroGenics would be "in the best possible position to maximize the launch of this drug, and reach many millions of patients."

Thursday's news caused AtheroGenics' shares (NASDAQ:AGIX) to jump 19.6 percent, gaining $3.24 to close at $19.79.

The deal calls for AtheroGenics to receive a nonrefundable up-front fee of $50 million, and it is entitled to $300 million in regulatory milestones and up to $650 million in commercial milestones. On top of that, the company stands to receive "very substantial" stepped royalty rates on product sales, Medford said. Although undisclosed, the specific royalty rates are reflective of a "late Phase III-stage deal for a drug targeting a major cardiovascular indication," he said.

About 13 million Americans suffer from coronary artery disease. AGI-1067 is an oral compound designed to block signaling pathways within the endothelial cells that make up the inner lining of blood vessels to inhibit the inflammatory process in atherosclerosis. The pivotal ARISE trial aims at assessing the drug's ability over placebo to reduce complications in patients already taking standard medications, including statins, high-blood pressure medications or anti-clotting agents.

Having taken AGI-167 into Phase III on its own, AtheroGenics was looking for an alliance that promised heavy back-end opportunities. The company, which reported a net loss of $23.1 million, or 61 cents per share, for the third quarter, had $196.7 million in cash as of Sept. 30, sufficient to continue regulatory development and fund a new drug application filing for AGI-1067, which is expected by the end of next year.

"Our plan was always to do the right deal at the right time," Medford told BioWorld Today. "We've always emphasized that our position was to be able to capture as much of the downstream revenue potential of this drug as we could, and this deal clearly meets that objective."

The company also wanted to ensure worldwide marketability, and "with AstraZeneca, I think we have an outstanding partner who can achieve that for us," Medford said.

While AtheroGenics will be responsible for getting AGI-1067 through regulatory filing in the U.S., AstraZeneca agreed to handle pre-commercialization activities, as well as all regulatory filings outside the U.S., and then oversee the worldwide marketing, sales and distribution of the product. AtheroGenics also expects to transition manufacturing duties to London-based AstraZeneca.

Through a joint development committee, AtheroGenics will continue to play a role in AGI-1067, as the companies pursue additional indications for the drug, such as diabetes.

In addition, the deal provides AtheroGenics the opportunity to begin building its own sales force. With the commercialization of AGI-1067, AstraZeneca agreed to fund for three years the creation of a 125-person specialty U.S. sales force, which will co-promote AGI-1067, as well as one of AstraZeneca's cardiovascular drugs.

"That was a very important aspect of the deal for us," said Mark Colonnese, AtheroGenics' chief financial officer. "It has been a strategic objective of ours for some time to segue from a research and development organization to a full commercial enterprise."

The year ahead looks busy. In addition to results and regulatory filing for AGI-1067, AtheroGenics also plans to advance AGI-1096, a product in development with Tokyo-based Astellas Pharma Inc. for the prevention of organ transplant rejection. That product is in Phase I testing.

AtheroGenics' preclinical pipeline includes compounds targeting chronic inflammatory diseases, such as asthma and arthritis, and "we'll be making announcements on those programs as they move forward next year," Meford said.