West Coast Editor

Stock-punishing news this fall about a slowdown in development of Incyte Corp''s HIV drug was followed by much happier word Monday, in the form of a potential $803 million research and licensing deal with Pfizer Inc. focused on the Phase II CCR2 antagonist program.

Incyte's shares (NASDAQ:INCY) closed at $5.86, up $1.06, or 22.1 percent.

Paul Friedman, president and CEO of Wilmington, Del.-based Incyte, told investors during a conference call that the firm talked with a number of would-be collaborators, and he was "confident we have secured the right partner and the right deal."

Under the terms, New York-based Pfizer gets exclusive worldwide development and commercialization rights to the oral CCR2 antagonists, including separate Phase IIa studies against rheumatoid arthritis and obesity in patients who are resistant to insulin. Included are all indications except multiple sclerosis and another that is undisclosed, both of which Incyte will take forward from the preclinical stage.

Pfizer is providing research funds, paying $40 million up front and buying $20 million in convertible subordinated notes, with $10 million issued within 20 days after the effective date of the deal and another $10 million after Incyte files an investigational new drug application in one of the retained indications. The notes carry no interest and will be convertible into Incyte stock at premium.

Milestone payments could mean as much as $743 million more for Incyte.

"We're not in a position to disclose the royalty arrangement," Friedman said, but he was "quite pleased" with the levels promised, which are "fully appropriate for the stage of the program and pretty favorable for Incyte."

The chemokine receptor CCR2 is a key to chronic inflammation, since CCR2 and its primary ligand, MCP-1, make up a critical signaling pathway for the recruitment of peripheral blood monocytes, which turn into inflammatory macrophages believed to contribute to various disorders. Animal research suggests that blocking CCR2/MCP-1 could work against not only RA and MS, but also diabetes, atherosclerosis, neuropathic pain and inflammatory bowel disease.

As for the ongoing Phase IIa studies, Pfizer and Incyte have "not definitively decided where we're going to go" with them, but may decide not to disclose data for competitive reasons, Friedman said.

Friedman noted Pfizer's "huge stake in cardiovascular disease," but whether the pharma firm will explore the possibly very lucrative atherosclerosis indication with the current lead drug or a backup compound is unclear.

Cambridge, Mass.-based Millennium Pharmaceuticals Inc. in August began a 110-patient Phase II trial of its CCR2 blocker, MLN1202, in patients at risk for atherosclerotic cardiovascular disease.

"That's an antibody, which comes with all the drawbacks of biologics [such as], cost of goods," noted Markus Cappel, vice president of corporate and business development for San Carlos, Calif.-based ChemoCentryx Inc., adding that Phase I trials with his firm's oral CCR2 antagonist - not yet partnered - are expected to start by the end of this year.

London-based GlaxoSmithKline plc and others "have had their own CCR2 programs, but there have been some failures," he told BioWorld Today.

In September, Incyte's stock plunged 41 percent on news that the HIV drug Reverset would need another Phase II study, thus delaying pivotal trials. Company officials met with the FDA to discuss data presented at an International AIDS Society conference in Rio de Janeiro, Brazil, and the agency wanted confirmatory safety and efficacy data for the oral, once-daily nucleoside analogue reverse transcriptase inhibitor. (See BioWorld Today, Sept. 29, 2005.)

Incyte, with the cash infusion and research help it will get through its whopper Pfizer deal - subject to antitrust review and the usual conditions - now has fuel for its other programs.

"Our plans for 2006 include moving at least two new compounds into clinical development," Friedman said.