Telik Inc. and Sanwa Kagaku Kenkyusho Co. Ltd. extended their collaboration for the third time and are approaching the goal of moving a product into the clinic.

South San Francisco-based Telik and Nagoya, Japan-based Sanwa have reached the lead optimization stage in their agreement on drug candidates to treat inflammatory diseases. Sanwa will provide funding for the research and have marketing rights in Japan and certain other Asian countries on any resulting compounds. Telik has rights in North and South America, with the companies jointly owning rights in the rest of the world. Although financial terms were not disclosed, there is no doubt Sanwa has played an important financial role in the development of Telik, considering the length and nature of their deal.

“The first agreement was in late [1996 or early 1997] and it first centered around our diabetes compound,” Telik CEO and Chairman Michael Wick said. “We licensed them Asian rights in exchange for an up-front payment and research and development support.”

That agreement soon was followed by a second deal, one centered on Telik’s TRAP technology. Sanwa nominated targets that Telik accepted and agreed to screen. Terms remained similar. Sanwa has Asian rights to any resulting products, with Telik having North and South American rights. Europe is shared, Wick said.

Out of the TRAP deal arose the most recent extension.

“This [extension] came out of that program,” Wick told BioWorld Today. “We apply our technology to their targets; if there is a hit, then it is subjected to lead optimization and that is where we are today.”

At this point, “about half a dozen to a dozen” targets have been supplied by Sanwa, Wick said, and Sanwa is permitted to nominate up to 30. The collaboration is scheduled to expire in 2006, but Sanwa can elect to continue to provide funding if it desires.

Telik went public in 2000, raising $35 million through the sale of 5 million shares at $7 apiece. Up until that point, Sanwa had been “a source of substantial revenue” for young Telik, Wick said, and owned as much as 15 percent of the company. Since the initial public offering, that equity stake has fallen to less than 10 percent, but the relationship between the companies provides Telik with benefits beyond financial ones.

“Telik is primarily a small-molecule cancer company,” Wick said. “[Sanwa] has let us leverage our technology in areas we wouldn’t do normally. They open up access to western Japan. They’ve been a great partner.”

Telik began as a tool kit drug discovery company. It’s TRAP chemogenomics technology allows for the screening of a target against as few as 200 “computationally chosen compounds,” Wick said.

“We profile our compounds against a panel of diverse proteins and we measure the binding affinity of the compound in our library against the target,” he said. “It has advantages [over other screening technologies] in time, money and effort.”

Telik’s in-house efforts have produced TLK286, a tumor-activated product in Phase II trials for ovarian, colorectal, non-small-cell lung and breast cancers. The breast cancer trial was initiated about a month ago, but Telik plans to present data from the other three trials at this year’s American Society of Clinical Oncology meeting in May. Once the Phase II trials are complete, Phase III will be evaluated.

TLK199, a small-molecule bone marrow stimulant, is about to begin its clinical life. Wick said the company received clearance to begin a Phase I/IIa trial, and its initiation is “imminent.” The product is designed to treat myelodysplastic syndrome, a form of pre-leukemia.

If all progresses well, Telik will put its third product, an orally active insulin receptor activator, into the clinic next year.

Telik also has a deal with the University of Arizona Cancer Center, allowing it to use Telik’s screening libraries. Most academic institutions do not have the capability to screen on such an industrial scale, Wick said, so it’s a positive for the institution as well as being “a source of biology for us.”

“And we retain essentially all the commercialization rights on the ones that we choose,” he added.

Telik’s stock (NASDAQ:TELK) fell 13 cents Friday to close at $10.58.