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Ambrx Nails Down Partnership with Merck KGaA to Develop Multiple Sclerosis Drug

San Diego-based Ambrx has signed a new partnership with German pharmaceutical giant Merck KGaA to co-develop a drug for multiple sclerosis. Ambrx and Merck KGaA have agreed to keep the financial terms of this global partnership hush-hush for the time being, although I was able to get some insight into what it means yesterday from Ambrx CEO Steve Kaldor.

The deal calls for Merck’s Geneva, Switzerland-based division (Merck Serono) to make an undisclosed equity investment in Ambrx, pay upfront cash, and provide milestone payments based on progress in development. Ambrx also gets the right to take a royalty stream on worldwide sales, or it can choose to convert that to a larger split of the U.S. profits or losses once the drug passes mid-stage clinical trials, Kaldor says. The drug, ARX424, is still is animal testing, and he wouldn’t say anything about its potential advantages over existing drugs or when it might even enter clinical trials.

Sometimes when terms are kept secret it’s because they involve tiny dollar amounts, but with a disease as big as multiple sclerosis, I suspect this is more about keeping competitors in the dark. Ambrx, as Kaldor described to me back in December, is working on engineering existing biotech drugs so they can be taken in fewer shots. With multiple sclerosis, the standard of care is with interferon-beta drugs, which must be taken in several shots a week. Ambrx scientists have been working on a modified drug that can be given in one injection every two weeks, which might help some of the 400,000 U.S. patients stick with their medication. It’s a big opportunity, because even though the existing drugs cause flu-like symptoms and swelling near the injection sites, they still generate $3.5 billion a year in annual sales. Several competitors are pursuing similar longer-lasting interferon drugs, including Cambridge, MA-based Biogen Idec and Seattle-based Allozyne.

Kaldor wouldn’t confirm whether Ambrx’s every-other-week injectable is subject to the Merck KGaA partnership or whether the partnership pertains to some other drug.

“MS is a very competitive space, and we have a differentiated opportunity,” Kaldor says.

The deal is interesting for Ambrx on a couple different levels. It’s the second deal between the two companies, who started working together in June 2007 on a longer-lasting version of human growth hormone that can be taken in fewer injections. That drug, ARX201, is designed to be a once-weekly injection instead of the usual daily shot. It’s now in mid-stage clinical trials.

So apparently the folks across the Atlantic are happy with how things are going with their San Diego partners, and were willing to double-down. “It’s good to see repeat business,” Kaldor says.

The other reason this deal is important is that Merck KGaA is a serious player in the multiple sclerosis business. It already markets a version of interferon-beta marketed as Rebif, so it knows the doctors, patients, and competitors in the market. It also is building a portfolio of MS drugs, including an oral pill form called cladribine that recently passed a pivotal stage clinical trial. “Merck Serono is very savvy in the space, and is taking a blended portfolio approach,” Kaldor says. “It’s a partnership we’re very excited about.”

Ambrx already had raised $96 million in venture capital, and depending how it spends its money, the money from this new deal will enable it to run at least until late 2011 or “considerably longer,” Kaldor says. The new partnership, Ambrx’s fifth with large drugmakers, means it has been able to hire 30 people in the past year, bringing its total staff to 84. It’s put the company in the enviable position of being able to hire when many companies are shedding talented staff, Kaldor says. “We’re building a company here, in spite of the macroeconomic environment,” he says.