By Brady Huggett

X-Ceptor Therapeutics Inc. is bound to Sankyo Co. Ltd. for at least the next three years in a potential $45 million research and development deal focusing on selective modulators of the liver X receptor.

"This is a lot of validation for our company," said Sanford Madigan, vice president, corporate development and strategic planning at X-Ceptor. "We've only had lab space for a year and a half. It gives us a lot of credence to our approach and what we have done the past 18 months. It puts us on the map."

The collaboration will center on the identification of synthetic ligands that modulate an orphan nuclear receptor, called liver X receptor (LXR), in the hopes that the ligands may increase expression of ATP-binding cassette transporter proteins and decrease cholesterol absorption in the intestine as well as cholesterol accumulation and plaque formation in arteries.

If one product from the collaboration makes it to the market, X-Ceptor will receive the full approximate $45 million payout. But Madigan said the deal's structure includes more than $20 million in up-front funding and research support for 50 scientists.

Sankyo, based in Tokyo, has been in the pharmaceutical business since 1899. Madigan said it is Sankyo's long history in the cardiovascular field that attracted X-Ceptor, and while the work initially will focus on novel small molecules and therapeutic candidates in that area, it may diverge into others since the science behind the LXR still is new.

"We don't really know what molecules react with it," Madigan said. "But we will be looking at other therapeutic candidates as well."

The collaboration is set for a three-year term, but there are extension options built in.

Privately held X-Ceptor, of San Diego, researches orphan nuclear receptors to identify and optimize small-molecule modulators of these receptors to treat disease. The company was spun out by Ligand Pharmaceuticals Inc., also of San Diego, in the summer of 1999. X-Ceptor began with $25 million in financing, $5 million of which came from Ligand. Ligand explained the spinning out by saying it couldn't afford to fully support the orphan nuclear receptor technology. So it moved it out of house, but kept it on a leash. (See BioWorld Today, July 2, 1999.)

Ligand retains an option to buy back X-Ceptor approximately three years following the original spinout. The purchase price for X-Ceptor could be as high as $61.4 million if bought at the three-year mark - $79.8 million if at four years - and Ligand would have to pay a $5 million fee to extend the option by one year.

Since the spinning out, X-Ceptor has grown to 40 employees, Madigan said, and should be at 50 by the end of the summer. The buyback price of X-Ceptor was set when Ligand spun it out, he said, so what Ligand would pay to bring it back in is unaffected. Whether or not Ligand will pick up that option is unclear.