LONDON – Heptares Therapeutics Ltd. is to be acquired by Sosei Group Corp. for $400 million, of which $180 million will be paid up front, with the remainder contingent on delivering value from Heptares' pipeline of compounds targeted against G protein-coupled receptor targets (GPCR).

The acquisition gives Tokyo-based Sosei ownership of a technology platform for structure-based drug discovery and expands its footprint in Europe, advancing the company's ambition to diversify away from its respiratory diseases franchise and to build an international biopharmaceutical business.

The acquisition is "a truly transformative event for Sosei," and "a very strong next evolutionary step for Heptares," said Peter Bains, external director, Sosei Group.

Heptares' proprietary platform for elucidating the structure of GPCRs has become a drug discovery goldmine, generating compounds targeting areas of high unmet need including Alzheimer's disease, metabolic disease, schizophrenia and migraine.

Heptares will become a wholly owned subsidiary of Sosei and will operate independently, with the existing R&D operations continuing at Welwyn Garden City, UK. CEO and co-founder Malcolm Weir said the acquisition ". . . is a great example of the translation of ground-breaking UK academic science into economic and potential therapeutic value."

Weir and all the 72 staff are staying with the company. In addition, Weir is to become the R&D officer of Sosei, with responsibility for all research outside Sosei's home base in Tokyo.

While Heptares will act as an independent subsidiary, the deal once again underlines the UK's inability to translate world-beating, publicly funded science into substantial UK-owned companies. Heptares was founded in 2007 around research funded by the Medical Research Council (MRC) and carried out by structural biologist Richard Henderson at the MRC's famous Laboratory of Molecular Biology in Cambridge.

Henderson's breakthrough was to apply single particle electron microscopy to determine the atomic structures of large protein assemblies, without the need to make a crystal. Although GPCRs are the target of many marketed drugs, being membrane-bound they are difficult to crystalize, and the Heptares technology platform has opened up a new era in GPCR-based drug discovery.

Heptares raised $30 million in its first private round of funding in February 2009 and a further $21 million in July 2013.

Using the technology platform, the company has generated a wholly owned pipeline of first-in-class or superior small molecules, with the lead product, an M1 muscarinic receptor agonist, in phase Ib development in Alzheimer's disease.

In addition to the in-house portfolio, Heptares has a number of high-value partnerships with companies including Astrazeneca plc, Merck & Co. Inc. (through a deal with Cubist Pharmaceuticals Inc.), Takeda Pharmaceutical Co. Ltd., Shire plc, Morphosys AG and Novartis AG.

These have generated more than $30 million in up-front and milestone payments to date. As an independent subsidiary of Sosei, it is intended that all these relationships are maintained and others are added.

Bains said that Sosei is making good progress in creating a sustainable business, but needed to make the next step, "to build on and go beyond," its current status. Heptares was identified as the outstanding prospect based on its GPCR technology platform, its portfolio and its alliances, he said.

This is not the first time Sosei has acquired a UK biotech with a technology platform and partnered assets. In July 2005 it paid $187.4 million in cash and shares to acquire Arakis Ltd., of Saffron Waldon, UK. The deal gave Sosei ownership of NVA237, now known as Seebri. The treatment for chronic obstructive pulmonary disease, co-developed with partner Vectura plc, was licensed to Novartis in April 2005 in a $375 million deal.

Seebri became Sosei's first approved product, with initial launches in Europe and Japan in October 2012.

The deal with Novartis also covered a second proposed product in which AD237 was to be combined with Novartis' QAB149, then in phase II trials. The resulting product, QVA149 or Ultibro, was launched in November 2013. Both NVA 237 and QVA149 were filed with the FDA in December 2014.

Royalties from these two COPD treatments are Sosei's main source of revenue, delivering ¥951 million ($7.57 million) in the third quarter of 2014, according to most recent published results.

Despite the relative immaturity and significant funding requirements of Heptares' in-house pipeline, Bains said the acquisition will enhance the growth of Sosei from 2017, on the basis of revenues from partnerships.

The eight candidates in the Heptares' pipeline currently are in preclinical development and phase I/Ib. There is plenty more fodder for drug discovery, with the company having elucidated 28 further GPCR targets in agonist and antagonist conformations, of which more than 10 are world-first GPCR structures, noted Weir.

This underscores the potential of the Heptares technology, which Weir said has been shown to be applicable across all 375 GPCRs in the human genome. GPCRs are the most important family of drug targets in the history of the pharmaceutical industry with 40 percent of approved drugs targeted at these receptors, Weir said.

These approved products provide evidence of clinical validity across a wide range of diseases.

"What all our programs have in common is that all the targets are well validated," said Weir. "There is very little risk they won't be efficacious."

Heptares has plans to complete seven phase I studies and deliver clinical proof of concept in four programs over the next two to three years. "We can then do partnering or take them forward alone," Weir said.

The current strategy will remain in place, said Bains. "We will be looking to partner and continuing to develop the wholly owned pipeline."