GSK Signs $1.5B Deal with VC-Backed Cellzome

LONDON (Reuters) – GlaxoSmithKline (GSK.L) is paying as much as $1.5 billion to develop new drugs against inflammatory disease with Anglo-German biotech company Cellzome, the two groups said on Wednesday.

Privately owned Cellzome will receive an upfront payment of 14.4 million pounds ($25.35 million) in cash and equity. The rest of the payments are contingent on the success of experimental medicines as they progress through development.

That will take time, since none of Cellzome’s drug candidates are ready to be tested in humans and it will be many years before they can be submitted for regulatory approval.

Cellzome believes its drug discovery technology could lead to a new generation of simple tablet treatments for rheumatoid arthritis and other serious inflammatory diseases.

The alliance is the latest in a string of deals by Glaxo, the world’s second biggest drugmaker, which has been aggressively licensing promising new drugs from outside firms.

Its largest deal to date was a $3 billion tie-up with Actelion (ATLN.VX: Quote, Profile, Research, Stock Buzz) two months ago, which gave the British-based group rights to the Swiss biotech company’s sleeping pill almorexant, currently in final-stage clinical trials.

Under the new deal, Glaxo has exclusive options to license drug candidates from Cellzome’s kinase programs directed against four identified targets, and three additional targets that have yet to be identified.

Cellzome will get as much as 118 million pounds per program in potential development, regulatory and commercial milestones and up to double digit royalties on eventual sales.

Tim Edwards, Cellzome’s chief executive, said the deal was good news for the small company — which employs researchers in Cambridge, England, and Heidelberg, Germany — especially given the early stage of its research.

Cellzome’s most advanced drug project, which is not covered by the Glaxo deal, is still 12-18 months from clinical development.

“Getting 14 million pounds upfront in a pre-clinical deal is really quite good going,” Edwards told Reuters.

The company has previously signed alliances with Novartis (NOVN.VX: Quote, Profile, Research, Stock Buzz) and Johnson & Johnson (JNJ.N: Quote, Profile, Research, Stock Buzz).

Cellzome has developed a proprietary Kinobeads technology, which allows researchers to screen for compounds likely to work against key molecular switches in the body called kinases.

Edwards said the approach could be used to find new medicines for a range of other disorders, including Parkinson’s disease and cancer.

Cellzome’s backers include Advent International, Atlas Venture, Astellas Venture Capital, Biofrontier Partners, Heidelberg Innovation, Index Ventures, Invesco Private Capital, SV Life Sciences, SG Asset Management and Sofinnova Partners.

Edwards said an initial public offering was a possibility for the company at some stage.

By Ben Hirschler
(Editing by Sue Thomas)