Washington Editor

An osteoarthritis agreement could provide in excess of €137 million (US$175.3 million) for Galapagos NV, which has partnered its preclinical program with GlaxoSmithKline plc.

The drug discovery and development alliance builds upon Galapagos' internal target and drug discovery programs in this space, which are focused on the main cell types in cartilage called chondrocytes. Terms of the collaboration call for the Mechelen, Belgium-based company to conduct the full spectrum of early research, establish clinical proof of concept and then deliver disease-modifying compounds to GSK.

"This is truly a turnkey deal," Galapagos CEO Onno van de Stolpe told BioWorld Today, noting that Galapagos' ability to offer discovery capabilities in combination with preclinical development capacity proved a "very important factor" in securing the partnership. He also pointed to the benefit of his company retaining control over these early research activities while simultaneously removing a good share of the risk. "We have been able to do it without giving up the upside."

Over the course of the seven-year agreement, Galapagos will expand its portfolio of validated osteoarthritis targets to "substantially more than" the current count of 11, van de Stolpe said. From there the company will screen compounds, identify tractable hits, pursue a number of hit-to-lead programs and develop the resulting leads into candidate selection compounds through Phase IIa.

At that point, GSK can opt to further develop and commercialize these compounds on a worldwide basis. Galapagos, which will contract a substantial part of its research activities to its relatively newly acquired service division, BioFocus plc, retains rights to compounds turned down by GSK.

"This is a sleeping giant in disease areas," van de Stolpe said, noting that osteoarthritis is typically treated by painkillers that address a symptom but do nothing to tackle any underlying causes of the condition. "There has never been anything that stops or reverses the disease."

In return for its work, Galapagos is receiving €4 million in up-front funding, followed by up to €65 million in success-based milestones for a successful drug development program, and GSK will make an equity investment of up to €3 million in Galapagos upon an undisclosed milestone in the future. A second successful drug development program would result in up to another €65 million. In addition, Galapagos stands to receive up to double-digit royalties on commercial sales of any resulting products.

Van de Stolpe said the milestone payments are structured such that Galapagos should receive money about once a year and essentially pay for its research along the way. "Our downside risk is limited," he said, adding that after six months of "tough" negotiating with London-based GSK's fairly new Center of Excellence for External Drug Discovery, "I think we have a fair agreement on the table."

Galapagos' research aims to address two underlying causes of osteoarthritis by identifying genes that stimulate anabolic repair processes called chondrogenesis and others that inhibit breakdown activity in affected joints.

Its 11 existing targets relate to cartilage repair, and three of those targets have progressed into drug discovery. The most advanced is in a hit-to-lead program. Research into targets that inhibit cartilage breakdown will quickly catch up, van de Stolpe said, to achieve a "balance" between the two causes of osteoarthritis.

In the end, he predicted that Galapagos' work would yield "at least two proof-of-concept results" for GSK, one related to cartilage repair and the other for its breakdown. The former could lead to a treatment for early stage disease, and the latter could lead to a later-stage disease treatment. "The therapeutic window for both will be different," he added.

Notably, GSK is familiar with Galapagos through its license to an asthma program that dates back to December 2004, as well as an arrangement in which it receives custom small-molecule libraries from BioFocus. Though those relationships reach into other departments at GSK, van de Stolpe said the companies' overall familiarity "clearly helped" in establishing this latest agreement because "the due diligence can focus on what the deal is about" rather than delving into evaluations of company capabilities.

In addition to osteoarthritis, Galapagos also has bone and joint disorder programs for osteoporosis and rheumatoid arthritis.

On Wednesday, its shares (Euronext Brussels:GLPG) gained €0.65 to close at €9.