Epizyme Inc. is expected to announce early Thursday a broad epigenetics partnership with Celgene Corp. that brings the small biotech $90 million up front, at least $160 million in milestone payments per compound and double-digit royalties.

The deal, officially inked with Celgene subsidiary Celgene International Sàrl, covers ex-U.S. rights to Epizyme's lead preclinical cancer program and any other histone methyltransferase (HMT) inhibitors Epizyme develops over the next three years – or four years, if Celgene opts to extend the deal by making an additional undisclosed payment.

The fact that Epizyme's lead program, a DOT1L HMT inhibitor for leukemia, is already included in the deal means Epizyme has taken the initial steps toward recognizing its first $160 million in milestones. But Celgene may choose to license many more programs; Epizyme's chief business officer Jason Rhodes said his firm initially prioritized about 20 of the 96 existing HMTs and has small molecules inhibiting many of them. "We'll obviously expand our efforts following the Celegene partnership," he said, so the number of compounds included under the deal "could be quite a few."

The compounds selected will be jointly developed by Epizyme and Celgene on a global basis under a 50/50 cost split, and Rhodes emphasized that Epizyme will be involved in decisions regarding what compounds are advanced. "We retain some control over what the pipeline will look like," Rhodes said. Epizyme also retains all U.S. rights for the compounds, and although a portion of the $90 million up-front payment takes the form of equity, Rhodes said Celgene remains a minority shareholder and Epizyme maintains its independence.

The only assets not included under the deal are those comprising Epizyme's two existing partnerships. The biotech got $20 million up front as part of a $650 million deal with GlaxoSmithKline plc early last year covering global rights to a specific, undisclosed set of HMT targets. (See BioWorld Today, Jan. 11, 2011.)

After that deal, Epizyme decided it wanted to build itself into a commercial operation and wouldn't give away any more U.S. rights. So its next deal, signed just two months later with Eisai Co. Ltd., brought in $6 million up front and $200 million in potential milestones for cancer drugs targeting the HMT inhibitor EZH2, but Epizyme retained a U.S. co-promotion option. (See BioWorld Today, March 11, 2011.)

Dealmaking interest remained high, but Rhodes said Epizyme realized it "would be very easy to dissipate the value of the company if we entered too many partnerships." The Cambridge, Mass.-based biotech, which is still private, wanted one more deal that would encompass the rest of its programs but leave U.S. rights off the table. Enter Summit, N.J.-based Celgene, which already markets two epigenetic cancer drugs, Istodax (romidepsin) and Vidaza (azacitidine).

Epigenetics refers to influencing gene expression by modifying the way a DNA sequence is structurally packaged without changing the sequence itself. The classic example is stem cells, which divide and differentiate to become every cell in the body without changing their DNA sequence.

Epigenetic structural modifications occur by a variety of mechanisms, including histone deacetylation, which HDAC inhibitor Istodax targets, and DNA methylation, which DNA methyltransferase inhibitor Vidaza targets. Epizyme focuses on HMT inhibitors, which Rhodes said encompass a large target class with strong genetic disease associations in oncology.

The DOT1L program, for example, targets the DOT1L enzyme, which is misregulated due to a chromosomal translocation and sent to "the wrong neighborhood" within the DNA, explained Epizyme president and CEO Robert Gould. The dislocated DOT1L turns on a family of genes that cause mixed lineage leukemia – a process Epizyme aims to stop. The biotech demonstrated in vivo efficacy last year – the first ever for an HMT inhibitor. (See BioWorld Today, July 13, 2011.)

In many ways, epigenetic enzyme inhibitors are similar to personalized kinase inhibitors like melanoma drug Zelboraf (vemurafenib, Daiichi Sankyo Co. Ltd. and Roche AG) and lung cancer drug Xalkori (crizotinib, Pfizer inc.), Gould said. In both cases, sequencing has revealed important changes in genetics or epigenetics that affect cell signaling and are linked to cancer in a well-defined subset of patients that can be identified with a diagnostic test. In the long term, Gould said he expects epigenetic drugs to be used in combination with each other and with kinase inhibitors as part of the cocktails that are eventually expected to dominate oncology.

So it's no surprise that epigenetics has evolved into an active area for investment and dealmaking, particularly in the past three years as more structural changes have been linked to the biology of specific diseases. Earlier this year, Constellation Pharmaceuticals Inc. and Genentech Inc. teamed up in an epigenetic deal, while last year Celldex Therapeutics Inc. partnered with MDxHealth SA on an epigenetic diagnostic test. The year before, EpiTherapeutics ApS partnered with Abbott on epigenetic cancer drugs and Cellzome Ltd. signed an epigenetics deal with GlaxoSmithKline.