Washington Editor

MethylGene Inc. expects to make $37.5 million via a deal with Taiho Pharmaceutical Co. Ltd. on a small-molecule inhibitor program against histone deacetylases for oncology.

MGCD0103, the first candidate in the project, is an orally available selective inhibitor for the histone deacetylases (HDAC) isoforms that MethylGene believes are involved in cancer. Donald Corcoran, president and CEO of Montreal-based MethylGene, told BioWorld Today he hopes to file an investigational new drug application later this year, leading to Phase I trials in the U.S. and Canada sometime in February.

Saying he is excited and pleased about the partnership, Corcoran described Taiho, a Tokyo-based company, as a significant player in the oncology market in Japan.

Financially, MethylGene will receive an up-front license fee, an equity investment and a research payment that combined totals $3.75 million. The agreement offers MethylGene milestone payments based on successful development, regulatory approval and commercialization of an HDAC oncology product - those milestones could reach up to $16.25 million. Corcoran said additional milestones are available for subsequent or second-generation HDAC oncology products, an area the deal includes.

While MethylGene has identified a number of isoform histone deacetylases it believes are relative to cancer, the company has not stated which types of cancer it expects to focus the research on, Corcoran said.

Histone deacetylases are enzymes that regulate gene expression. Their overexpression in cancer cells turns off tumor suppressor genes and promotes cellular proliferation. The company believes the process can be reversed with small-molecule inhibitors, which block activity of the enzymes and allow re-expression of tumor suppressor genes.

Indeed, Taiho has agreed to provide MethylGene with research funding support for eight scientists for a minimum of two years as well as to fund preclinical and clinical development costs in North America for an HDAC inhibitor. MethylGene will receive royalties on sales in Japan, Korea, Taiwan and China - areas in which Taiho will be responsible for running trials and commercializing products. MethylGene retains rights to the remainder of the world and conceivably could seek a European partner at some point, Corcoran said.

The agreement is a financial dream for MethylGene, a privately held firm founded in 1997. What's so fantastic about it is that Taiho will pay about 80 percent of the costs associated with running the Phase I and II trials in North America. In exchange, Corcoran said MethylGene is giving up only about 20 percent of its product rights.

However, once MGCD0103 (and others) advances to Phase III, Corcoran said he might consider another partner for areas outside Taiho's contracted countries.

In other business, MethylGene is developing MG98, a Phase I cancer compound that targets the enzyme DNA methyltransferase, in a partnership with MGI Pharma Inc., of Minneapolis. And in July, the company announced a deal possibly worth $33.75 million with Merck-Frosst Canada & Co. to develop a small-molecule inhibitor program against bacterial beta-lactamases to fight antibiotic resistance. (See BioWorld Today, July 27, 2003.)

The company is trying to close a $10 million to $20 million round of U.S. financing this year. Corcoran said MethylGene has received a term sheet and is circulating for additional U.S. co-leads.