Archemix Secures Partnership with Glaxo to Develop Drugs for Inflammatory Diseases

12/23/08Follow @xconomy

(Update: The first paragraph includes information that seven drugs are subject to the partnership, and the final paragraph includes comment from Archemix about this deal’s impact on its proposed merger.)

Archemix scored one of the biggest biotech deals of the year just in time for Christmas. The privately held Cambridge, MA-based drug developer secured a partnership with GlaxoSmithKline, the world’s second-biggest drugmaker, that will bring in $27.5 million in upfront cash and potentially another $200 million in milestone payments for each of the seven drugs included in the alliance.

Under the deal, Glaxo will get access to Archemix’s proprietary “aptamer” technology, which employs short strings of DNA or RNA designed to bind tightly and specifically with disease-related proteins. The goal will be to develop treatments for inflammatory diseases like rheumatoid arthritis and inflammatory bowel disease. In return, Archemix will get $27.5 million in cash upfront, including a $6.5 million equity investment from Glaxo. Another $200 million in milestone payments for each drug could go to Archemix if these drugs reach certain milestones in development, the companies said in a statement. If the drugs ever become marketed products, Archemix could stand to get a “double-digit” percentage royalty on sales.

“We are very excited about this collaboration with GSK. GSK is an outstanding partner with leadership and expertise in inflammation, and we look forward to expanding our efforts in inflammation where aptamers could offer novel options to treat disease,” said Errol DeSouza, Archemix’s CEO in a statement.

Archemix didn’t have much to say in the statement about how this alliance affects its most important corporate strategy of the moment—its planned merger with Lexington, MA-based NitroMed (NASDAQ: NTMD). That deal, announced Nov. 18, would provide a lifeline to NitroMed shareholders by giving them access to Archemix’s technology and cash, while allowing Archemix the access to public investors it wants by giving it a spot on the NASDAQ, which wouldn’t be possible now through an IPO.

Of course, the terms of the merger, which still needs to be approved by shareholders of both companies, were negotiated before Archemix secured this stabilizing deal with Glaxo. Obviously, Archemix has a little more security now than it did a month ago, and its value probably just went up by quite a bit. Because of the upfront payment from the Glaxo deal, Archemix now expects it will have $78 million to $88 million in cash if the combination with NitroMed is finalized.

But this isn’t a done deal. To complicate matters further, NitroMed has gotten an unsolicited takeover bid from Deerfield Management, the huge biotech hedge fund, which already owns 12 percent of NitroMed and wants to buy the rest of its shares for 50 cents a share. We’ll be watching to see how this story unfolds, whether NitroMed and Archemix get hitched, or end up going their separate ways.

Archemix says the merger is still proceeding as planned, even after signing the Glaxo deal. “This GSK collaboration is part of Archemix’s ongoing strategy to establish partnerships for aptamer therapeutics in key disease areas, and this changes nothing about the proposed Nitromed merger. We are continuing to be on track with progress toward closing the Nitromed deal, including an S-4 filing that was made last week with the SEC,” said Gregg Beloff, Archemix’s chief financial officer.

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