In a deal that could result in $1.2 billion in milestone payments - on top of a $35 million up-front payment - EPIX Pharmaceuticals Inc. signed with GlaxoSmithKline plc to discover, develop and market drugs that target four G-protein-coupled receptors.

The alliance includes three targets to be determined by both companies, as well as EPIX's 5-HT4 partial agonist program, PRX-03140, which recently entered a Phase IIa study for Alzheimer's disease.

"We've said consistently to The Street and to others that we really needed a partner for our Alzheimer's program," said Michaela Kauffman, CEO of EPIX.

The Street was listening, and applauded the move, as EPIX's stock (NASDAQ:EPIX) rose $1.67, or 30.25 percent, Tuesday to close at $7.19.

The 5-HT4 program, among others, was added to the company's pipeline through its August merger with Predix Pharmaceuticals Holdings Inc. That deal was valued at $90 million when announced in April. (See BioWorld Today, April 4, 2006.)

Under the agreement with GSK's Center of Excellence for External Drug Discovery (CEEDD), EPIX will receive $35 million in initial payments, including $17.5 million through the purchase of 3 million shares of common stock. The Lexington, Mass.-based company also is eligible to earn up to $1.2 billion in potential milestones related to discovery, development, regulatory and commercial achievements across all four programs. Company officials declined to say when those payments might occur or whether they are divided evenly between the programs, but Kauffman confirmed that royalties on sales of any products that reach the market would be "tiered, double-digits, across the board."

Terms of the deal also call for EPIX to take on development of small-molecule drug candidates targeting the four GPCRs, including PRX-03140, through to clinical proof of concept. GSK then will have an exclusive option to license each of them for worldwide development and commercialization. If the London-based firm exercises its option for the 5-HT4 partial agonist program, EPIX holds on to co-promotion rights in the U.S.

"We think this is a big validation of our model," Kauffman told BioWorld Today. "It also gives us the financial security to move our pipeline forward."

The company expects to end 2006 with $100 million in cash and marketable securities, which, along with expected revenue from the collaboration and an earlier one with Amgen Inc., provides EPIX with enough resources to fund operations through 2008.

EPIX (then Predix) formed the deal with Thousand Oaks, Calif.-based Amgen four months ago. Worth more than $307.5 million, it is focused on S1P1 modulators for autoimmune diseases. (See BioWorld Today, Aug. 1, 2006.)

Kim Drapkin, EPIX's chief financial officer, noted that between the deal with Amgen and the deal with GSK, "if we are able to hit any of the success milestones in these agreements, we will have funding beyond 2008."

GPCRs are the largest known class of molecular targets that have proven therapeutic value. About 40 percent of the top 50 selling drugs worldwide interact with GPCRs as their target proteins. Biological molecules can bind to GPCRs, triggering cellular processes involved in obesity, cognition, depression and pain. EPIX has advanced four GPCR drug candidates from discovery to the clinic in less than four years.

One of 14 serotonin receptors, 5-HT4 controls the release or production of acetylcholine, the neurotransmitter responsible for memory loss in Alzheimer's disease. Kauffman said PRX-03140 may have an advantage over current therapies because it can turn on new acetylcholine, as well as slow the progression of the disease.

"If you want to fill up the bathtub to take a bath, you have to block the drain and turn on the faucet," he said. Acetylcholinesterase inhibitors on the market, Aricept (from Eisai Co. Ltd. and Pfizer Inc.) and Exelon (from Novartis AG), "block the drain," he added, "but they don't work for very long."

PRX-03140 also appears to lack the gastrointestinal side effects seen with currently approved therapies.

In addition to the Alzheimer's disease therapy, the Predix merger brought to EPIX PRX-00023 and PRX-08066. The first is slated for a Phase IIb trial in major depression during the first half of 2007, and the second currently is in a Phase IIa trial in pulmonary hypertension related to chronic obstructive pulmonary disease, an indication for which nothing is FDA-approved. Data from the Phase IIa trials of PRX-08066 and PRX-03140 are expected in the second half of next year.

In September, PRX-00023 failed to show statistical significance in a Phase III study in generalized anxiety disorder, but showed encouraging data in depression. (See BioWorld Today, Sept. 25, 2006.)

"We're very excited about that product," Kauffman said. "It lacks the sexual dysfunction that currently available drugs have."

A fourth clinical-stage product, PRX-07034, is in a Phase Ib study for obesity, and a fifth, the thrombus imaging agent EP-2104R, has completed a Phase IIa trial.

Before its merger with Predix, EPIX focused mainly on imaging agents. Its blood-pool imaging agent, Vasovist, is approved in Europe, Australia and Canada, and is deemed approvable in the U.S., but the FDA has requested additional trials. (See BioWorld Today, Aug. 29, 2006.)