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When it came to signing its first biotech collaboration since being founded in 2003, Acceleron Pharma Inc. made sure it was a big one.

The Cambridge, Mass.-based firm agreed to partner its Phase I-stage bone-forming agent ACE-011 and up to three discovery programs targeting bone loss with Celgene Corp. in a deal that could, pending successful development of all four programs, total more than $1.8 billion. That includes an up-front payment of $50 million, milestones of up to $510 million for development and commercialization of ACE-011 and up to $437 million in milestones for each of the three discovery programs.

It's an impressive deal, particularly since the lead compound hasn't yet reached Phase II. ACE-011, a protein drug designed to work by inhibiting activin, a negative regulator of bone mass, has demonstrated in preclinical studies an ability to increase bone mineral density and currently is in a Phase Ib study supported by a grant from the Multiple Myeloma Research Foundation in bone loss associated with multiple myeloma.

A Phase IIa trial is slated to start this summer, said Steven Ertel, vice president of corporate development for privately held Acceleron.

"We had been looking for a collaboration for our lead product, and Celgene was really the perfect fit for us," he told BioWorld Today. "We both thought alike in terms of strategy.

"It's a good deal for both companies," he added.

Celgene's interest in ACE-011 is obvious. The Summit, N.J.-based firm already markets three multiple myeloma drugs, including Revlimid (lenalidomide) and Thalomid (thalidomide), so a compound targeting multiple myeloma-induced bone loss would fit snugly within that franchise. Celgene also will have the right to develop ACE-011, as well as the three discovery-stage programs, for other bone loss indications.

Maintaining a "buy" rating on Celgene, analyst Matthew Osborne, of New York-based Lazard Capital Markets LLC, in a research note, hailed the deal as a "successful leverage of Celgene's formidable presence in multiple myeloma."

Shares of Celgene (NASDAQ:CELG) closed at $54.87 Wednesday, down $1.23.

Under the companies' agreement, Acceleron will handle all initial research and development activities, including manufacturing at its own GMP facility, through the end of Phase IIa, after which Celgene will take the lead on late-stage studies and will oversee manufacturing for Phase III and commercial supplies of ACE-011.

"We wanted to be actively engaged in both research and development," Ertel said. "That was one structural element that was important" when signing the deal.

Another key factor was to retain co-promotion rights to ACE-011 in North America. Acceleron intends "to build our own commercial infrastructure," Ertel said, "so this was an important step" in that direction.

Acceleron will receive tiered royalties on worldwide net sales.

The company has not disclosed details of the three discovery programs included in the Celgene collaboration, except to say that those will be directed to bone loss indications and will not include compounds in its existing preclinical pipeline aimed at muscle loss indications and cancer.

Acceleron is moving toward an investigational new drug application for ACE-031 for treating muscle loss associated with muscle dystrophy and cancer, and has an anti-angiogenesis compound, ACE-041, in preclinical development for multiple myeloma and solid tumors.

Not bad for a firm founded less than five years ago to develop drugs aimed at modulating the growth of bone, muscle, fat and the vasculature for treating musculoskeletal and metabolic diseases, as well as cancer.

The company's approach focuses on using growth and differentiation factors and bone morphogenetic proteins, and it's an approach that has attracted solid investor interest. To date, Acceleron has pulled in about $90 million in venture funding, most recently closing a $31 million Series C round in October. (See BioWorld Today, Oct. 31, 2007.)

Terms of the Celgene partnership also include a pledge by the larger biotech firm to purchase a minimum of $7 million of Acceleron common stock at the time of the company's initial public offering.

Though, at this time, Acceleron has no immediate plans to go public, Ertel said, "We're keeping our options open."