Staff Writer

In a deal potentially worth more than $500 million, CombinatoRx Inc. entered a multiyear research and license agreement with Angiotech Pharmaceuticals Inc. to discover, develop and commercialize new products built from drug combinations.

It is Boston-based CombinatoRx's largest deal to date, and one that could bring sizable development and regulatory milestone payments.

Having filed for a proposed initial public offering last December, CombinatoRx could not comment on the deal due to SEC-imposed quiet period rules. But the numbers speak for themselves, validating the 5-year-old company's focus on developing new medicines by combining approved drugs. The company has seven of its internally discovered candidates in clinical trials.

Under the terms, CombinatoRx will receive a $27 million up-front license payment, as well as a $15 million equity investment. That entitles Vancouver, British Columbia-based Angiotech to license up to 10 CombinatoRx compounds. It may license up to five more by paying an additional $2 million per compound. That would bring the total bill up to $52 million, but the big money comes in the form of development and regulatory milestone payments - up to $30 million for each product selected for development. At a total potential 15 compounds, that's $450 million.

There also are royalties on cumulative commercial sales, as well as a potential $7 million extension payment, at Angiotech's option, once the collaboration reaches 30 months.

The collaboration, expected to last five years, will combine CombinatoRx's screening methods with Angiotech's systems biology and drug repurposing approach.

"Basically, there's two real parts to the deal. One is gaining access to their drug candidates that they've discovered thus far," said Todd Young, Angiotech's vice president of investor relations and communications. "The second part of the agreement is really sort of the tougher-to-comprehend one because it's such a massive opportunity."

Angiotech will exclusively license any combination compounds that could be applied in its field of drug devices and interventional medicine products, initially for vascular, orthopedic and general surgery indications. The compounds may come from CombinatoRx's clinical and preclinical pipeline, as well as from its Chalice database of drug combinations.

It's a large opportunity, Young said, because by starting out with 2,000 compounds, CombinatoRx can create as many as 2 million different compound combinations.

"What we're going to do, in conjunction with CombinatoRx, is take all of those compound combinations and put those through our proven assay system, looking at our major fields of interest of orthopedics, vascular disease, adhesions and infections," he told BioWorld Today.

Over the past few years, Angiotech has worked on single approved drugs and channeled them through its assays, as part of a one-drug - or magic bullet - approach. The deal with CombinatoRx will build on that program.

"A lot of diseases have multiple targets," Young said, "so it sort of makes sense to use multiple compounds to hit those, and that's what we're getting into now with this deal."

Intellectual property that comes out of the collaboration will be jointly owned, and CombinatoRx will exclusively cross-license the IP for systemic therapies and areas outside of Angiotech's field.

Since its 2000 founding by scientists at Harvard University and Massachusetts Institute of Technology, CombinatoRx has built its business on combining medicines to attack diseases, such as cancer and rheumatoid arthritis, as well as respiratory, metabolic and infectious diseases.

Its rheumatoid arthritis drug candidate, CRx-150, is a combination of an approved antidepressant and an approved cardiovascular drug. Its cancer drug candidate, CRx-026, combines a sedative and an antibiotic, and its selective steroid amplifier candidate, CRx-119, combines a low-dose steroid and an antidepressant.

Also in the clinic are the company's asthma drug, CRx-170; its psoriasis drug, CRx-140; and two more immuno-inflammatory disease drugs, CRx-139 and CRx-102. All of the candidates, except for CRx-026, have reached Phase IIa trials. At the preclinical stage, the company is evaluating CRx-TBD for diabetes.

An attractive advantage of CombinatoRx's drug development process is that it can cost less than $10 million per product - a bargain compared to more traditional drugs. That's because the safety already is known for the single agents that make up each product, as is the bioactivity, the human pharmacology and the manufacturing feasibility. Moving from target identification to Phase IIa normally can take nine years; CombinatoRx's process starts with lead compound identification and can move to Phase IIa in less than four.

Scientists founded CombinatoRx on the discovery that two drugs used together can produce a completely new effect and benefit not seen with either drug alone, and it can enhance the activity and efficacy of one while using lower doses. Some classic examples of this are CHOP (cyclophosphamide, doxorubicin, vincristine and prednisone); Advair (steroid and B2-adrenoreceptor agonist); and Advicor (statin and niacin). In June, NitroMed Inc., of Lexington, Mass., received approval for BiDil, a fixed-dose combination of the generic drugs isosorbide dinitrate and hydralazine to treat heart failure in African-Americans. (See BioWorld Today, June 27, 2005.)

CombinatoRx has several existing collaborations with companies like Novartis AG, of Basel, Switzerland, for various drug discovery programs, with the National Institutes of Health for anthrax toxin therapies, and with Taiwan-based Henkan Pharmaceutical Co. for Asian rights to CombinatoRx's cancer drug CRx-026. The last deal, worth more than $23 million, was signed this summer. (See BioWorld Today, July 19, 2005.)

The company filed for its IPO in December, aiming to raise $100 million. On Monday, it filed an amendment to its prospectus, listing the number of shares to be offered at 6 million and a price range of between $10 and $12 each. (See BioWorld Today, Dec. 14, 2004.)

CombinatoRx has raised about $90 million in venture capital. As of June 30, it had cash, cash equivalents and short-term investments of $23.4 million.

Angiotech's stock (NASDAQ:ANPI) dropped 3 cents on Monday - the day the deal was announced - to close at $13.99. On Tuesday, it dropped 18 cents to close at $13.81.