OTTAWA, Ontario - MethylGene Inc. President and CEO Don Corcoran described the signing of a C$65 million (US$43.7 million) license and R&D agreement covering the company's small-molecule inhibitors of DNA methyltransferase (DNA MeTase) as very significant.

Corcoran told BioWorld International that partnering with Bloomington, Minn.-based MGI Pharma Inc. is a good fit because MGI has the necessary clinical trials expertise in oncology to help progress MG98, a second-generation mRNA inhibitor, into later-stage trials.

"The deal means that we can also look for further partners in Europe for our technology, while having an excellent partner who will help us build upon the achievements we have made to date," Corcoran said.

MethylGene, based in Montreal, discovers and develops small molecules, novel mRNA inhibitors and functional genomic technologies toward unique molecular targets for the treatment of cancer and infectious disease. The company's MG98 compound is composed of synthetic DNA that is chemically capped on each end of the molecule to provide greater stability, safety and activity than earlier generations of antisense compounds.

According to Corcoran, MethylGene has developed MG98 as a novel and targeted approach to inhibiting gene expression of the nuclear enzyme DNA MeTase. It has demonstrated anti-cancer activity, both alone and in combination with other anti-cancer agents in ongoing Phase I dose-escalation trials involving a variety of solid tumor types.

The terms of the deal with MGI include MG98 and other small-molecule inhibitors of DNA MeTase and could be worth over C$65 million if all the milestones are reached for the two programs.

MGI will make an initial cash payment to MethylGene followed by certain milestone payments based on progress toward receiving North American approvals. MGI Pharma will fund the ongoing development of MG98 and the DNA MeTase small-molecule inhibitors and make an approximate C$10 million equity investment in MethylGene. Through the time of regulatory approvals in the United States and Canada, the initial and milestone cash payments by MGI would aggregate to approximately C$24 million for each of the two development programs.

MethylGene will also receive royalties on net sales revenue and retain a co-promotion right in North America and all rights outside of North America.

"MG98 represents an important addition to MGI's portfolio of anticancer agents in development and we intend to move the product into Phase II clinical trials later this year," said John MacDonald, vice president, research and development.

MGI is focused on the acquisition, development and commercialization of drugs primarily for the treatment of cancer and rheumatology disorders. Last year the company generated revenues from product sales of approximately US$18.6 million, primarily from Salagen Tablets as a treatment for the symptoms of radiation-induced xerostomia, or chronic dry mouth, in head and neck cancer patients. In addition, the company is developing irofulven as a lead product candidate for the treatment of cancer. Irofulven is the first product candidate being developed from its proprietary family of naturally derived compounds called acylfulvenes.

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