BioWorld International Correspondent

LONDON - Vernalis plc completed a trilogy of deals, announcing an Hsp90 cancer research collaboration with the Novartis Institute for Biomedical Research to add to recent agreements with Biogen Idec Inc. and Endo Pharmaceuticals Inc.

Reading-based Vernalis will receive a signature fee of $1.5 million, while Novartis will pay all R&D costs throughout the three-year deal. Cambridge, Mass.-based Novartis also is investing $9 million in Vernalis, buying 7.1 million new shares at 70.18 pence per share, representing 4.6 percent of Vernalis' enlarged share capital.

In addition, Novartis would make payments for development milestones for each candidate it takes into development. If two products make it to market, those payments could exceed $75 million, excluding royalties.

The deal follows a six-month evaluation period by Novartis.

Vernalis CEO Simon Sturge told BioWorld International, "Part of the objective of the evaluation was to assess existing leads, but I can't say when we will get any [development] milestones."

The Hsp90 program is the result of a collaboration set up in March 2002 between RiboTargets Ltd. (acquired by Vernalis in March 2003) and Cancer Research Technology Ltd. (CRT) in London, the technology transfer arm of the research charity Cancer Research UK. CRT is entitled to a percentage of the revenues from the Novartis deal. The level of research funding was not disclosed, but Sturge said it would involve substantial structural and chemistry work, with some biology.

Sturge said the agreement with Novartis is an important validation of Vernalis' structure-based drug discovery capabilities, acquired through RiboTargets. "We've been working on Hsp90 for some time now, and, although it is emerging as an important target, there is no competition on the small-molecule side yet.

"We are very excited by it as a target, because it is applicable to a range of tumor types." Hsp90 is a molecular chaperone essential for the stability and function of several oncogenic proteins that drive uncontrolled cell division. Hsp90 is overexpressed in tumors and inhibiting it is designed to block multiple signaling pathways that mediate tumor growth.

Following the deal with Novartis, and those with Biogen Idec in Parkinson's disease and Endo for marketing rights to the migraine treatment Frova, Vernalis expects to have £42 million (US$75.6 million) cash at the end of August. "This puts us in a very strong cash position, and we intend to use it as a strategic tool," Sturge said, including possible merger and acquisition activity.

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