The hyped expectations of the industry seen just years ago, when a solid drug discovery platform might bring pharmaceutical suitors aplenty, has been replaced by a product-centric focus. Drugs and revenue - in other words, tangibles - are the key, not promises.
But proving that platform deals can still be done, Kalypsys Inc. signed with Merck & Co. Inc. to install its lead discovery platform into Merck's research facility, allowing access for Merck's worldwide research organization. Financial terms were not disclosed, but Pratik Shah, chief business officer at Kalypsys, told BioWorld Today the deal was an all-cash multimillion-dollar agreement that includes an up-front portion given upon delivery and then potential milestone payments. Although these types of deals might be scarcer than they were a few years ago, Shah said good science speaks for itself.
"I think the bar [for platform deals] is very high," Shah told BioWorld Today. "But companies, regardless of the environment, continue to have operations in drug discovery. If there is a truly unique platform that will have a valuable impact, people will pay attention because it solves real problems."
Merck, Shah said, found that unique platform at Kalypsys. The San Diego-based company contacted Merck and invited its representatives to "come and take a look," Shah said. Berta Strulovici, executive director of basic research at Merck, visited.
"It's fair to say she was very impressed," Shah said. "When [Merck] came out, well, seeing is believing."
What Merck saw is a drug discovery process that begins by developing assays using pathway-based models of human disease and toxicity. Once the assays are developed, Kalypsys conducts drug screening with its Discovery System, the centerpiece of which is a pathway-based Discovery Ultra-High Throughput Screening System. Merck, of Whitehouse Station, N.J., expects to increase its screening capacity in multiple therapeutic areas through the platform, and the companies will work together to extend "some capabilities that Merck is interested in having," Shah said. He likened the lead discovery platform to prospecting during the Gold Rush.
"You could pan two or three rivers for gold, or you could have something that allowed you to pan 10 times as many rivers for gold," he said, adding that with the higher level of panning, you could then "focus your energy on the place where you are getting success."
About a year ago, Kalypsys closed its first round of financing for a gaudy $43 million - at that point the highest private financing in 2002, according to BioWorld Snapshots. The funding was to provide two years of financing, and Shah said Wednesday the company doesn't plan "to seek financing in the near term." (See BioWorld Today, April 3, 2002.)
"We've made excellent progress in our first year of operations - it's great to have a deal of this substance and nature done, less than a year from when we completed our Series A," he said.
At 45 employees now, the company has nearly doubled in size since the completion of the Series A round. Beyond the lead discovery platform, the company has a chemistry automation platform as well as a gene functionalization capability. The company is developing compounds of its own and has moved certain ones into animals. And although the Merck deal goes a good distance in validating the platform, Kalypsys is more than that, Shah said.
"Our mission is to use these technologies efficiently to discover unique, valuable drug targets," he said. "We are not simply a technology provider. We are a drug discovery organization that happens to have a unique and powerful technology, and we have the capability to provide this to partners."