By starting the big pharma flesh-pressing early, Kosan Biosciences Inc. attracted F. Hoffmann-La Roche Ltd. and a potential $220 million deal it couldn't refuse for its early stage cancer product, KOS-862.

"We had been planning to partner this out at some point," said Daniel Santi, CEO and chairman of Hayward, Calif.-based Kosan. "We didn't pursue partnerships very vigorously because we intended to take this into Phase II trials ourselves. But we decided early on to start talking to large pharmas that could help us with later-stage clinical trials.

"As we got to know Roche better, we felt it would be an excellent partner for this particular product. And it had the vision to understand the value of the product and came up with a very attractive deal for us. We didn't feel we would do any better with waiting a year."

Roche, of Basel, Switzerland, will have worldwide exclusive rights to KOS-862, although Kosan retains co-development and co-promotion rights in the U.S. Kosan will receive "a little over $30 million" in initial payments, said Michael Ostrach, Kosan's president and chief operating officer, plus milestones and "a significant royalty." Total committed funding and all milestones could reach as high as $220 million. The roughly $30 million includes reimbursement of research and development expenses and funding of a back-up program.

Shelley Rosenstock, executive director, product public relations at Roche, told BioWorld Today, "The alliance will allow Roche to combine its extensive strength in oncology, development and marketing with Kosan's proprietary technology for the design and production of polyketides." Roche, she said, feels KOS-862 comes from a "very promising, novel class of agents."

KOS-862 (Epothilone D) is in three Phase I solid tumor trials now, examining various regimens. The product is from the epothilone class of drugs - polyketide natural products that inhibit cancer cells by a mechanism similar to paclitaxel.

"One of the problems with Taxol is that cells can become very rapidly resistant to the drug because of an efflux pump, MDR," Santi told BioWorld Today. "What it does is pumps Taxol out of the cell as fast or faster than it comes in." But KOS-862 is not affected by the efflux pump, Santi said. (Taxol is sold by Bristol-Myers Squibb Co., of New York.)

The companies will guide the development of KOS-862 through a joint committee, giving Kosan a voice in what happens, and Kosan could buy a larger equity stake in the product further down the road if it desires, Santi said.

"We basically retain our continued presence with the product," he said. "At the end of Phase II, if we wish, we could make a payment to cover the cost of the expenditures and the future costs in Phase III and obtain a bigger piece of royalties on sales."

The Phase I trials of KOS-862 are stand-alone studies, but the product also will be examined in combination therapy. Santi said Phase II work could begin before the end of the year. Kosan retains the rights to epothilones for all other therapeutic areas.

Beneath KOS-862, Kosan has "a number of projects going on," Santi said.

"The one you'll hear of next will be our program with a molecule called geldanamycin, which is a molecule that binds to a protein, HSP 90, and results in the degradation of a large number of potential cancer targets, many of which are kinase targets," he said. The product is in preclinical work, although there is an analogue that is in Phase I studies at the National Cancer Institute in Bethesda, Md.

Kosan is developing with Johnson & Johnson, of New Brunswick, N.J., a molecule called a ketolide. The product is an antibiotic and also is preclinical, although Santi said industry watchers should "hear more about that very soon."

With a healthy partnership signed for the young KOS-862 cancer program, Kosan not only has received some validation for its platform, but also has given itself a funding boost in a dry financing season.

"I think this is a big milestone," Santi said. "This is our first grown-in-house program - it's representative of several others we have going. The financials will give us a significant bank account that will give us considerable staying power."

Kosan's stock (NASDAQ:KOSN) rose 13 cents Monday to close at $6.24.