Pharmasset Inc. could receive up to $168 million in milestone payments and maybe much more, after licensing its preclinical hepatitis C drug program to F. Hoffmann-La Roche Ltd.

Specifically, the companies formed a partnership to develop nucleoside polymerase inhibitors for the treatment of chronic HCV infection. Pharmasset is receiving an undisclosed up-front fee and potential milestone payments for PSI-6130, the lead nucleoside compound in the partnership. Altogether, funding could total $168 million. In addition, the Atlanta-based antiviral company is receiving research and development support and would receive royalties on sales if the product reaches the market. It retains certain co-promotion rights in the U.S.

"Companies such as ours, that are emerging pharmaceutical companies, are always excited to gain access to the clinical development and commercial expertise of a major pharmaceutical company like Roche, especially in an area as specialty-focused as hepatology," Pharmasset President and CEO P. Schaefer Price told BioWorld Today. "It's an area where, if you look at the current market leaders, Roche is one. We are particularly excited because they do have a dominating position in that market right now."

The deal could end up being worth even more to Pharmasset if Roche exercises options to related nucleoside polymerase inhibitors. If Roche opts in, Pharmasset could receive in excess of $300 million in total milestones. In addition, the Roche Venture Fund made a $4 million investment in Pharmasset and received warrants to purchase an additional $6 million in shares at a premium price within the next two years.

"These are rather large economic terms for a compound that is still in research," Price said. "That speaks to the fact that Roche is strategically interested in HCV and is willing to put significant funding behind its strategic focus there."

Basel, Switzerland-based Roche is gaining worldwide rights, excluding Latin America and Korea, to PSI-6130 and its prodrugs. Pharmasset will be responsible for preclinical work, investigational new drug filings and Phase I proof-of-concept studies, with Roche managing other preclinical studies and clinical development.

"The collaboration is designed to make access of the strength of both parties," Price said, adding that Pharmasset is an expert "in the discovery of nucleoside-based antivirals"

"We also have demonstrated through our own clinical efforts [in other programs] that we are quite capable of taking drugs into the early phases of clinical studies," he said. "Roche has expertise in the area of later-stage development, and so we're looking to that clinical development expertise, late-stage focus, plus the commercialization aspects that Roche can bring into the collaboration."

The partners believe PSI-6130, the centerpiece of the deal, might offer greater efficacy and activity against HCV, especially in combination with Roche's Pegasys (peginterferon alfa-2a) and Copegus (ribavirin). For patients who do not respond to current therapies, the addition of nucleoside polymerase inhibitors to the treatment regimen might offer benefit.

Outside of the deal's framework, Pharmasset will continue to develop and retains worldwide rights to ongoing and future hepatitis C programs unrelated to the PSI-6130 series of nucleoside polymerase inhibitors.

"We have other ideas to approach hepatitis C, other than what we have licensed to Roche," Price said. "We have other ideas in other chemical spaces, for the same target and same indication."

The company has several other antiviral compounds in advanced preclinical studies for hepatitis B and other areas, as well as two HIV drugs in Phase II trials: Racivir and Reverset. The latter is the subject of a year-old collaborative licensing agreement with Incyte Corp., of Palo Alto, Calif. That deal gave Incyte rights to the oral nucleoside analogue in the U.S., Europe and other undisclosed markets in exchange for an up-front payment and potential milestone and royalty payments. Pharmasset still has marketing and commercialization rights in South America, Mexico, Africa, the Middle East, Korea and China. (See BioWorld Today, Sept. 9, 2003.)

Racivir, a nucleoside reverse transcriptase inhibitor, is unpartnered, and Price said the company plans to advance it internally. Eventually, Pharmasset plans to build its HIV-based commercial capabilities around the product, he said.

To date, the privately held company has raised more than $55 million in venture capital funding. The 6-year-old company's most recent financing was worth $40 million. (See BioWorld Today, Aug. 11, 2004.)

"We just concluded our Series D financing in August," Price said. "So this deal isn't about cash. It's about maximizing the opportunity in our hepatitis C program and putting it with who we think is the leader in the hepatitis C field at this moment. I think our big internal decision was whether, based on our balance sheet strength, should we continue to take this drug a bit further and put it into the clinic ourselves, maybe into Phase II studies, and then look at the possibilities of partnering it. But if you look at the economics we received in this deal, based upon the risks that are still inherent, I think we made the right decision to partner at this point with Roche."