In a deal that could bring Xenon Pharmaceuticals Inc. $157 million in pre-commercial payments, Novartis Pharma AG agreed to research, develop and commercialize compounds from Xenon's SCD1 drug development program.
SCD1 - or Stearoyl-CoA Desaturase-1 - is a key regulatory enzyme in fatty-acid metabolism and a target for the treatment of obesity and metabolic syndrome. Vancouver, British Columbia-based Xenon is developing small-molecule inhibitors of SCD1 that are in preclinical development.
Simon Pimstone, Xenon's president and CEO, told BioWorld Today that the agreement with Novartis shows that Xenon has successfully transformed itself from a target discovery company focused on human genetics into a drug discovery and development business.
"This is the first major external validation of that successful transition," Pimstone said. "The fact that Novartis has chosen Xenon as its partner also validates the quality of work that's been done at Xenon in this particular program."
Novartis, of Basel, Switzerland, gains exclusive worldwide rights to develop, manufacture and commercialize products related to Xenon's SCD1 program, while Xenon retains an option to co-promote the SCD1 products in certain undisclosed territories. Novartis will fund the research of Xenon scientists for a minimum of two years and will make an equity investment in Xenon upon Xenon shareholder approval. The $157 million consists of an up-front licensing payment, the equity investment and research funding, and near- and longer-term milestone payments. Xenon also is entitled to royalties at an undisclosed rate.
The royalties climb with sales. Pimstone said, "I think they would be acknowledged as very healthy royalty flows to the company."
The SCD1 program focuses on inducing weight loss by increasing metabolic rate through lipid oxidation. The market is large, and if Xenon is successful it would have a first-in-class product. Obesity, a major risk factor for Type II diabetes mellitus, affects 300 million people worldwide, while an estimated 194 million people suffer from diabetes. In the U.S., more than 44 million Americans are obese, an increase of 74 percent since 1991. During the same period, diabetes increased by 61 percent.
"Obesity represents one of the largest market opportunities in the industry today," Pimstone said. "It's a disease of epidemic proportions, and yet the therapies available today are really inadequate, with poor patient tolerability being a major problem."
Obesity is an underlying factor in several other common disorders, such as hypertension, osteoarthritis and cancer.
"Safe and effective therapies are urgently required in combination with improvements with lifestyle, diet and exercise," Pimstone said. "So the actual size of the market is currently untested, but probably represents a multibillion-dollar market opportunity."
Novartis has experience in developing drugs to treat patients with metabolic disease. Xenon's SCD1 program complements the Novartis portfolio of approaches in diabetes and other metabolic diseases, and fits with the pharmaceutical company's goal of developing therapeutics that address unmet medical needs. Pimstone said Xenon selected Novartis as a partner for its commitment to the metabolic field and its shared philosophy with Xenon in developing novel medicines.
"They have the honor of having more FDA approvals in the last four years in the U.S. than any other company," he said.
While Xenon originally intended to move its lead product from the SCD1 program into clinical development in the first quarter of 2005, the companies now need to sit down and make the development plan, Pimstone said.
Privately held Xenon focuses on developing small-molecule therapies based on the genetic causes of select metabolic, neurological and cardiovascular diseases. The company changed its name in June from Xenon Genetics Inc. to better reflect its drug discovery and development focus and its goal of commercializing drugs.
SCD1 inhibitors have shown in vivo efficacy in multiple animal models. The inhibitors show favorable properties, such as high medicinal appeal, good safety, no hERG blocking or CYP450 inhibition, and no significant inhibition against a panel of 100 different protein targets. When the SCD1 gene is knocked out and when the protein it transcribes is deficient, the result is a reduced visceral and subcutaneous body fat, lower triglyceride levels and increased insulin sensitivity.
Xenon also has a neuroscience program, and a program in iron metabolism targeting both iron overload and anemia. Those programs are both at the discovery stage.
The agreement with Novartis is Xenon's second major pharmaceutical alliance. It formed an agreement in 2000 with Warner-Lambert Co., which later was acquired by Pfizer Inc., to capitalize on the discovery of the ABC1 gene to find therapeutics to treat low levels of high-density lipoprotein, a condition associated with cardiovascular disease. (See BioWorld Today, May 26, 2000.)
Xenon has raised C$90 million (US$58.4 million) since its angel financing in 1999. Its investors include New York-based firms Invesco Private Capital, JP Morgan Partners and Pfizer; Boston-based Fidelity Management & Research Co.; Bagsvaerd, Denmark-based Novo Nordisk A/S; Menlo Park, Calif.-based InterWest Partners; Toronto-based Royal Bank Capital Partners; and the Vancouver-based firms GrowthWorks Capital and Ventures West Management.
As of June 30, Xenon had C$24 million in cash on hand.