Concert Pharma Jamming with Glaxo in Deal with $1B-Plus Potential

6/2/09

Concert Pharmaceuticals has hooked a whale in the drug industry, London-based GlaxoSmithKline, for its first corporate partnership deal concerning the biotech startup’s deuterium-modified drugs. Lexington, MA-based Concert reports today it will receive $35 million from Glaxo (NYSE:GSK) in upfront payments and equity investments in the deal, which could be worth more than $1 billion to Concert depending on factors such as the success of the drug programs involved.

The deal is a big endorsement for Concert’s ability to swap out some of the hydrogen in existing drug molecules with a hydrogen-relative called deuterium, resulting in drugs with unique chemical compositions and potentially greater effectiveness than the original versions. The deal with Glaxo involves the development of three programs in Concert’s R&D pipeline as well as the application of Concert’s deuterium modification on three drugs in Glaxo’s pipeline. Glaxo will continue to develop those three drugs. Concert’s lead drug candidate included in the deal is a deuterium-modified version atazanavir, an anti-viral drug marketed under the trade name Reyataz for the treatment of HIV. The other compound named in the deal is a preclinical drug for chronic renal disease, and the third has yet to be named.

Glaxo is already a powerhouse in the market for HIV treatments, and in April the firm announced that it would form a new company in partnership with drug giant Pfizer (NYSE:PFE) to develop and market HIV drugs.

In preclinical studies, Concert says, its deuterium-modified atazanavir retains its anti-viral effects and is metabolized slower in the liver than the unmodified version. Slowing the metabolism of atazanavir could extend the duration of its anti-viral activity in the body and eliminate the need to take it with ritonavir, another HIV treatment that is intended to boost the effectiveness of the former drug by inhibiting an enzyme in the body that chews up atazanavir. Atazanavir brought $1.29 billion in sales revenue to New York-based drug giant Bristol-Myers Squibb (NYSE:BMY) last year. Concert’s modified atazanavir is due to begin clinical trials later this year.

The deal give Glaxo the option to license any of the three Concert drugs involved in the pact once certain clinical milestones are met. Concert is responsible for research and development of those programs for now. Also, Concert is eligible for milestone payments on drugs that Glaxo opts to develop as well as double-digit royalties on potential sales of drugs involved in the deal, company CEO Roger Tung said, in an interview.

“The economics of the deal are very favorable for Concert,” Tung said. “It comes at a time when it’s a difficult economic climate overall.”

Concert, which has raised $96 million since it was founded in 2006, already had enough cash to support its operations and clinical programs for two years without the deal with Glaxo, said Steve Bernitz, the company’s chief business officer. He did not provide specifics on how much longer the Glaxo deal extends the firm’s cash runway, but said that the impact was significant.

Xconomy got the inside scoop on Concert’s deuterium-modified drugs last year when Luke talked to Tung, a former senior scientist at Cambridge, MA-based drug developer Vertex (NASDAQ:VRTX).

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