Staff Writer

Merck & Co. Inc. is farming out some of its cardiovascular discovery effort to privately held Canadian firm Xenon Pharmaceuticals Inc. in a deal that would bring in up to $94.5 million for the first therapeutic target and up to $89.5 million for each subsequent target that is selected for drug discovery.

The genetics-based drug discovery work of Xenon is no stranger to major drugmakers, four of which previously secured deals with Vancouver, British Columbia-based Xenon. Its other partnerships are with F. Hoffmann-La Roche Ltd., Takeda Pharmaceutical Co. Ltd., Novartis Pharma AG and Pfizer Inc., formerly Warner-Lambert Co.

But this latest deal with an unnamed Merck affiliate was a bit different from Xenon's other deals. Plump with cash and no shortage of partners, Xenon wasn't actively looking for a cardiovascular research partner when Merck came along with its offer.

Even though Xenon wasn't seeking a suitor, the Merck partnership, Xenon's fifth, "was a very good marriage," Xenon CEO Simon Pimstone told BioWorld Today.

For starters, he said, Xenon's foundation is in the lipids and cardiovascular area. And the company has successfully managed its other partnerships involving the discovery and validation of targets. In addition, Pimstone said that he and co-founder Michael Hayden, Xenon's chief scientific officer, both have expertise in cardiovascular genetics and biology.

It also probably helped that Hayden had worked collaboratively with Merck before for more than a decade and that Pimstone also had many interactions with Merck in the past, establishing a level of trust between the two firms.

Under the Merck deal, Xenon is tasked with conducting human and animal validation studies using its clinical genetics platform. Xenon also will perform drug discovery and select preclinical development of small-molecule compounds for those targets selected by a joint steering committee.

Merck has the option to exclusively license targets and compounds from Xenon for development and commercialization. In return, Xenon receives research funding and is eligible for option exercise fees, research, development and regulatory milestone payments of up to $94.5million for the first target and up to $89.5 million for each subsequent target selected for drug discovery.

Merck also will pay Xenon undisclosed royalties on sales of products resulting from the collaboration. Xenon retains the right to develop and commercialize certain compounds for which Merck does not exercise its option.

Although the Merck collaboration will require Xenon to hire additional staff, the work is not expected to interrupt Xenon's other programs, Pimstone said.

The company is studying oral and topical formulations of a pain drug candidate XEN40. The oral formulation has completed Phase I safety, tolerability and pharmacokinetic studies. Proof-of-concept studies are expected to begin in the third quarter. Select rights for Japan and certain Asian countries have been licensed to Takeda.

The topical formulation of XEN402 is currently in investigational new drug application-enabling studies and is expected to begin clinical development by year-end. Xenon also has an active small-molecule backup program

Xenon has partnered with Osaka, Japan-based Takeda to develop and commercialize oral formulations of Xenon's lead product for pain, XEN401, in Japan and other Asian countries. Takeda is responsible for all development and commercialization activities and related costs in the licensed territories. Takeda agreed to pay $75.5 million and will receive an up-front cash payment and is eligible to receive development and regulatory milestone payments as well as sales-based milestone payments upon successful commercialization of XEN401.

In 2006, Xenon found a partner for its protein therapeutic program in anemia, agreeing to a potential $51 million research collaboration and licensing deal with Roche. The companies agreed to work to investigate the target hemojuvelin, a defective protein discovered by Xenon that underlies juvenile hemachromatosis, a protein that appears to play a key role in the regulation of red blood cell production and in iron in the blood.

Xenon entered an agreement with Novartis in 2004 to research, develop and commercialize compounds from Xenon's Stearoyl-CoA Desaturase-1 (SCD1) drug development program. SCD1 is target for the treatment of obesity and its resulting consequences, including the metabolic syndrome. Precommercial payments to Xenon under the Novartis deal total up to $157 million. Xenon also will receive royalties on products developed from that collaboration.

In a 2000 cardiovascular deal with Warner-Lambert, Xenon received $58 million as the companies agreed to work to identify drug targets and lead compounds for the treatment of low HDL cholesterol. Low levels of HDL cholesterol (the so-called "good cholesterol") have been linked to cardiovascular disease.