Avanir Pharmaceuticals Inc. partnered its first preclinical program, doing so with Novartis AG to develop small-molecule drugs that target macrophage migration inhibitory factor.

Worth $210 million in up-front payments, milestone payments and research funding, the deal is focused on providing new treatments for inflammatory disease. The first product could reach the clinic in 2006.

"Obviously it's very significant for Avanir. For one thing, it validates our technology and our approach to discovering new drugs," said Gerald Yakatan, the San Diego-based company's president and CEO. "I think we have several preclinical, early clinical programs where the ultimate goal is to license them out. This is the first one to have that happen. It's our first preclinical deal with a big pharma."

Basel, Switzerland-based Novartis gains global research, development and commercialization rights to any oral products developed that target MIF as treatments for inflammatory diseases. It will cover all product development expenses, while both parties will contribute expertise and intellectual property.

In the deal, $200 million comprises up-front and milestone payments based on certain development, regulatory and sales achievements. Avanir also could receive increasing royalties on worldwide product sales.

Yakatan would not give specifics on the royalties except to say the rate was within industry standards for most preclinical deals.

In addition to the $200 million, the company will receive up to $2.5 million per year for up to four years of research funding.

"It helps us move that program forward a lot faster with a lot more resources than we could have done on our own," Yakatan told BioWorld Today.

MIF is a pro-inflammatory cytokine thought to play a role in the pathology of rheumatoid arthritis, psoriasis and inflammatory bowel disease. Data suggest that MIF is an early mediator of several pro-inflammatory pathways, and an important regulator of tumor necrosis factor-alpha (TNF-alpha), macrophage migration and the anti-inflammatory steroid response.

"MIF is probably one of the first cytokines ever found, but nobody could ever find a receptor for it, so it kind of languished," Yakatan said. "A number of pharmaceutical companies at one point actually tried to develop compounds against MIF and were unsuccessful, so it just disappeared."

Avanir acquired the approach, as well as a few early stage compounds, from San Diego-based Ciblex Corp. in August 2001. Avanir's chemists found a way to increase potency of the compounds by up to 50-fold. At the time, literature suggested that MIF levels were elevated in inflammatory disease, and that by controlling and reducing MIF levels, it would be possible to reduce the levels of TNF-alpha.

"It's basically, in one sense, an oral TNF-alpha inhibitor but working through another protein," Yakatan said.

MIF also regulates the body's innate corticosteroid response to inflammation.

"We had two things to go after," Yakatan continued, "MIF's role in inflammation itself through corticosteroid response, and also the modulation of TNF-alpha levels."

Yakatan said the first product could reach the clinic in 2006, but it will be dependent on decisions made by a joint research committee formed by Avanir and Novartis.

Earlier this month, Avanir raised $17.1 million in a common stock offering to pay for a Phase III trial to begin later this year of Neurodex in diabetic neuropathy, as well as research and development activities for other products in the pipeline. The proceeds and existing cash were expected to last the company a little more than a year. (See BioWorld Today, April 8, 2005.)

Avanir is working to complete a rolling new drug application for Neurodex in pseudobulbar affect by the end of June. The product is an orally administered combination of dextromethorphan and the enzyme inhibitor quinidine. Avanir holds worldwide rights.

In the pipeline, Avanir has AVP-13358 in a Phase I study for asthma, and several preclinical compounds in the areas of inflammation, atherosclerosis, cancer and infectious diseases. The company has one approved product, Abreva, for cold sores, which is marketed in North America by GlaxoSmithKline plc, of London.

Avanir took that product through clinical trials and regulatory filings itself, partnering it only a few months before its July 2000 approval.

"Now, Neurodex we're taking all the way through, but those programs required smaller clinical trials that we could handle by ourselves," Yakatan said.

Such is not the case for Avanir's preclinical candidates.

"The trials get ridiculously expensive and we'll be looking to partner each of those things," Yakatan said. "The MIF program has been the first one."

Avanir's stock (AMEX:AVN) rose 25 cents Thursday to close at $2.90.