In a deal potentially worth $384 million for Vertex Pharmaceuticals Inc., the company entered a global collaboration with Merck & Co. Inc. to develop and commercialize the former's lead aurora kinase inhibitor, VX-680.

The compound is expected to enter the clinic this year for cancer.

"We're very excited about getting this into patients and really seeing what this particular mechanism and compound can do," said Tony Coles, senior vice president of commercial operations at Cambridge, Mass.-based Vertex.

With $34 million in committed funding from Merck, the companies will use Merck's molecular profiling approach and microarray technologies as they conduct a joint research program to find VX-680's activity across different cancer types. They also plan to identify follow-on drug candidates directed at aurora kinases. Whitehouse Station, N.J.-based Merck will fund the research conducted by both companies, and it will lead all clinical development activities, covering worldwide development and commercialization expenses of VX-680.

The $384 million includes milestone payments. Broken down, that figure includes a $20 million up-front payment, as well as $14 million in research funding over the next two years. The milestone payments are as much as $350 million, which includes $130 million for the successful development of VX-680 in the first cancer indication. The remaining $220 million in milestone payments would come into play if Vertex successfully develops VX-680 or follow-on compounds in other cancer indications.

The agreement also includes a royalty to Vertex, but Coles would not disclose the exact percentage, except to say the structure was consistent with Vertex's other collaborations. Michael Partridge, Vertex's director of corporate communications, added that Vertex has never done a collaboration with a royalty rate less than double-digits.

While Merck holds worldwide commercialization rights to the product, Vertex has the opportunity to negotiate a co-promotion agreement down the line.

"Merck has been quite open about this particular opportunity and would be a great partner for us," Coles said. "We would certainly learn a lot from them."

Vertex also could earn additional milestone payments - in excess of the $350 million - if it develops Aurora kinase inhibitors outside the areas of oncology. Coles said the company believes VX-680 is only the first of many novel kinase inhibitors it could bring to the collaboration.

But for now, the focus is on VX-680 in cancer. Earlier this year, Vertex filed an investigational new drug application with the FDA and expects to begin Phase I studies by the end of the year. Preclinical results of VX-680 have demonstrated that a compound targeting the aurora mechanism can induce tumor regression in human models of solid-tumor cancers.

"We will certainly know more in the months to come, but from all of the in vivo data," Coles told BioWorld Today, "this particular compound prevents tumor progression, it stops tumor cell growth, it promotes p53, which is the body's natural tumor suppressor."

Aurora kinases are enzymes specific for and essential to cell growth and division that might be important control points for slowing the growth and spread of tumors. They are a family of serine-threonine kinases known to be overexpressed in many tumor types, including colon cancer, breast cancer and leukemia. Amplification of Aurora genes is associated with progression of colorectal cancer and poor prognosis in certain types of breast cancer.

Vertex decided to partner the program because oncology does not fall within the company's core focus of antivirals and immune-mediated diseases. Vertex has a strategy to commercialize hepatitis C products itself in North America, while finding partners for other products and territories, Coles said.

In its pipeline, the company has two clinical candidates for hepatitis C: merimepodib, which is moving into a Phase IIb trial, and VX-950, which just entered a Phase I trial. VX-765 is moving into Phase II for inflammatory diseases, while VX-702 just completed a Phase IIa trial in acute coronary syndrome. Vertex has another oncology product, VX-944, which is in Phase I development and uses a different mechanism of action than VX-680. The company is seeking a worldwide partner for the product.

"Oncology is not at the moment one of our core areas of focus," Coles said. "As a result, it's our intent to put these compounds in the hands of partners that can develop and commercialize them."

Earlier this month, Vertex entered a $33 million deal with Mitsubishi Pharma Corp., of Tokyo, for the development and commercialization of the hepatitis C drug VX-950 in Japan and the Far East. That agreement came only a few weeks after Vertex signed a $21 million partnership to develop therapeutics with Cystic Fibrosis Foundation Therapeutics Inc., the nonprofit drug discovery and development affiliate of the Cystic Fibrosis Foundation. (See BioWorld Today, May 25, 2004, and June 15, 2004.)

The company has a goal for this year to build value through new collaborations, its chairman and CEO, Joshua Boger, said in a conference call Tuesday. The Merck deal is a fine first step.

Vertex's stock (NASDAQ:VRTX) rose 42 cents on Tuesday to close at $10.15.