By Jim Shrine


Inflazyme Pharmaceuticals Ltd. entered one of the largest collaborations ever by a Canadian biotechnology company, agreeing to a $91 million deal for inflammatory drugs with Hoechst Marion Roussel (HMR).

Inflazyme is guaranteed US$16 million in license and equity payments, and can get another US$75 million in milestones through approval of one product. The deal's potential is much greater still for the Richmond, British Columbia, company since it also includes certain rights to an HMR compound; royalties; and help with research into the mode of action and cellular target for IPL576, possibly opening new developmental avenues.

Inflazyme's IPL576 is the most advanced drug candidate from a class of compounds derived from a sea sponge found off the coast of Papua New Guinea. This group of compounds, along with HMR's H1/NK1 inhibitor, is at the center of the collaboration, which focuses on asthma, allergies and respiratory disease, as well as other inflammatory conditions that might be applicable once the IPL576 class is better understood.

HMR, the pharmaceutical company of Frankfurt, Germany-based Hoechst AG, gains worldwide rights (except in Canada) to IPL576 for asthma and respiratory disease. Inflazyme get rights to oral and topical forms of H1/NK1 for allergies, and will be responsible for taking both compounds through Phase IIa trials.

"We're thrilled to have the endorsement of our technology and recognition of our strong science skills," Inflazyme president and CEO Ian McBeath told BioWorld Today. "The deal involves milestones for just two compounds. It has much greater potential than that.

"Having HMR as a partner removes a lot of the risk for us," he said. "It also means we can accelerate development of the product. The company is much stronger because of this partnership."

Inflazyme's stock (VSE:IZP) also is much stronger following its first major collaboration. It gained C48 cents Tuesday, or 57 percent, to close at C$1.32 (US 88 cents).

First Trial Expected Next Quarter

Inflazyme plans to take IPL576 into Phase I trials by the end of the second quarter, assuming satisfactory toxicology studies. Phase IIa studies then would be expected to be completed a year later. The company hopes the oral compound has the efficacy of inhaled steroid products for asthma, without the steroids' side effects.

H1/NK1 for allergies is not as advanced but, with its shorter developmental time line, both compounds could reach market around early 2003, McBeath said. H1/NK1 has a component that lowers sensitivity to an allergen, and another that lowers the inflammatory response to that allergen.

The $16 million up-front part of the deal entails a $1 million license fee and a $15 million equity component, in the form of convertible preferred stock that Inflazyme can access at its option over three years. It will convert at the stock price at that time, and never would give HMR more than a 19 percent stake in Inflazyme, McBeath said.

The milestones, he said, are payable upon three events: completion of Phase IIa trials, successful completion of Phase III trials, and approval of a compound.

A significant part of the deal and one that may have "hidden value" is the joint effort into identifying how IPL576 works and what it targets, McBeath said.

"IPL576 is a new series of compounds," he said. "We don't know how it actually works. We do know it does not work through the normal pathways of glucocorticoid steroids. Therefore, we do not believe it has the potential to cause steroidal side effects. The target in the cell it is hitting is still undiscovered.

"If it is a unique target," McBeath continued, "it will be the pathway into a whole new series of drugs and a new way to treat inflammation. This is really important to us. Finding out how it works and where it works is critical, if it is going to be used in other indications. It's in both our interests to find this out."

Inflazyme will own all rights to those discoveries until after Phase IIa, when HMR takes over development of an IPL576 compound for asthma or respiratory disease. Then, the companies will have joint ownership.

Inflazyme has an option to develop IPL576-derived compounds for inflammatory indications other than asthma or respiratory disease. Hoechst, though, has the right of first refusal to license such products on terms to be negotiated later.

After the Phase IIa trial of H1/NK1, HMR has the option to take over development and rights to oral forms of the drug, while Inflazyme would keep rights to topical ocular uses, such as in eye drops.

Before the deal, Inflazyme had 30 employees and enough cash to last six months. The spending rate and staff will increase considerably now that the company is preparing to take IPL576 forward, McBeath said.

About a year behind the 576 series at Inflazyme is the IPL423 series, which was derived from a plant found in British Columbia that exhibited anti-inflammatory properties. It works in an entirely different way than the sponge-derived series, McBeath said, but also appears to be novel. Arthritis is an initial target.