Signing its fourth major drug discovery alliance, Lexicon Genetics Inc. formed a $72.5 million collaboration with NV Organon to find five drug candidates for inflammatory disease.

Organon gets access to Lexicon's drug target discovery capabilities and an exclusive right to co-develop biotherapeutic products that modulate 300 genes selected for the collaboration, including two existing drug discovery programs.

The Woodlands, Texas-based Lexicon will receive $22.5 million in an up-front payment, as well as up to $50 million in research funding over the four-year agreement.

"The goal of this collaboration is to develop at least five breakthrough biotherapeutic drug candidates, both antibodies and protein therapeutics," said Arthur Sands, president and CEO of Lexicon.

Lexicon will combine its target discovery and biotherapeutics capabilities with Organon's clinical development, biologics manufacturing and commercialization franchise to accelerate the development of therapeutic antibodies and secreted proteins.

Lexicon will create and analyze mouse knockouts of each of the 300 genes to identify drug targets. The companies will select targets for further research and development, equally sharing costs and responsibilities for research, preclinical and clinical activities.

"The primary indication emphasized is inflammatory disease," Sands told BioWorld Today. "However, the nature of our system allows us to discover all potential medical functions, and any medical indication of high value will be pursued."

The companies also will equally share commercialization costs and product revenue. Organon will manufacture products that come out of the collaboration for clinical development and worldwide sales.

The first existing drug discovery program included in the agreement involves a cell-surface receptor "whose knockout resulted in a decrease in inflammatory response in an asthma model," said Brian Zambrowicz, Lexicon's executive vice president of research.

Lexicon also is working to develop monoclonal antibodies for a secreted protein in a second existing program that should move into preclinical research later this year.

"Blocking this target with an antibody could provide a novel approach for treating breast cancer," Zambrowicz said.

It should take about two-and-a-half years to complete the screening of all 300 genes, but several could be prioritized for drug development much sooner, he said. It's too early to say how soon something might reach the clinic.

The genes will undergo screening as part of Lexicon's Genome 5000 program, which is knocking out the function of 5,000 genes to discover novel drug targets. The company already has harvested 60 drug discovery programs from Genome 5000, and it has signed three other agreements. The most recent deal, with Osaka, Japan-based Takeda Pharmaceutical Co. Ltd., was signed last July, giving the pharmaceutical company access to all of Lexicon's blood pressure control targets. (See BioWorld Today, July 29, 2004.)

Another agreement signed with New York-based Bristol-Myers Squibb Co. centers on neuroscience drug programs, while a third is signed with South San Francisco-based Genentech Inc. also to discover therapeutic proteins and antibodies. (See BioWorld Today, Dec. 19, 2002, and Dec. 19, 2003.)

While the Genentech agreement is focused on 500 genes from the Genome 5000 program, the deal with Organon is for "another set of genes, a separate set of 300," Sands said. "We have quite a large portfolio."

Since the companies are sharing expenses, the up to $50 million in research funding from Organon should cover about 50 percent of the costs. Broken down, it means Lexicon will receive $15 million in each of the first two years. The remaining funds in years three and four will be offset by each company's contribution to research activities.

While the agreement is structured as a 50/50 profit-sharing arrangement, either company can opt out of development in favor of a royalty structure. If Lexicon decides to continue with the profit-sharing structure, it would build its own sales force to co-promote products that reach the market.

"We anticipate playing a role all the way along in commercialization and, of course, through clinical development," Sands said.

Organon, a unit of Akzo Nobel, of Oss, the Netherlands, recently established a new biotechnology research center in Cambridge, Mass., as well as a new corporate headquarters in Roseland, N.J. The company is trying to expand its U.S. presence and has decided to pursue biotechnology as a business initiative.

Sands said collaborations such as the one with Organon puts Lexicon's technology at the forefront of the genomics industry.

"What we have seen," he said, "is that only with the in vivo gene knockout system can we unlock the value that is sitting in these very important genes. It's that kind of discovery of the physiologic function that has given us and our collaborators a strategic advantage in the field."

Lexicon's stock (NASDAQ:LEXG) rose 29 cents Tuesday to close at $4.78.