BioWorld International Correspondent

Intercell AG earned an up-front payment of $9.5 million and could receive up to $76 million more in milestones from an agreement with Merck Sharpe & Dhome Research Ltd., an arm of Merck & Co. Inc.

The deal covers development of a prophylactic vaccine and, potentially, a therapeutic monoclonal antibody, against Group A Streptococcus infections. The Vienna, Austria-based company also would gain royalties on resulting product sales.

News of the deal lifted Intercell to a new high of €15.74 on the Vienna Stock Exchange during trading Friday, although the stock closed the week at €15.50, a price around which it traded during the start of the week, as well.

The deal closely resembles an existing agreement between Intercell and Whitehouse Station, N.J.-based Merck that concerns Staphylococcus aureus. Earlier this year, Merck availed of an option to proceed with the development of monoclonal antibodies, having already begun development of a vaccine against that pathogen.

"We are a little more optimistic than we have been already because Merck is now coming back to us and buying another antigen before they see the data from the Staphylococcus aureus trial," Intercell Chief Financial Officer Werner Lanthaler told BioWorld International.

In each case, Merck is buying access to antigens Intercell defined through its Antigen Identification Program. Antibodies isolated from individuals who have recovered from or who are resistant to a particular bacterial infection are screened against peptide fragments encoded by epitope libraries derived from the genome of the pathogen in question.

The numbers attached to the latest deal are bigger than those associated with the first Merck deal, Lanthaler said, but the S. aureus development program addresses a larger market and would generate larger royalty payments. But the size of the up-front and milestone payments were not the main drivers for this latest deal, he said.

"For us, the most important point is to have a dedicated partner for the project," Lanthaler said. "Here, in all fairness, Merck is the player, when you look at the success they have had with their vaccines."

Group A Streptococcus causes about 10 million infections worldwide every year, including mild infections of the throat and skin. In the U.S., Intercell said, it leads to between 10,000 and 15,000 cases of severe, invasive infection, 2,000 of which result in death.

Intercell probably will be able to recognize the up-front payment immediately, Lanthaler said, but as the company does not issue guidance, that would not affect the company's financial forecasts.

At the outset of this year, it said it aimed to match last year's growth in revenue of 86 percent. "We are confident we will make at least our 86 percent growth target," Lanthaler said.