BioWorld International Correspondent

LONDON - Two UK companies with a jointly developed product signed one of the biggest deals to date in European biotechnology, agreeing to a potential $375 million license with Novartis AG for their treatment of chronic obstructive pulmonary disease (COPD).

Arakis Ltd. and Vectura Group plc each will get $15 million up front, with the balance tied to clinical, regulatory and commercialization milestones for AD 237, which is timetabled for a launch in 2010. Novartis also will pay for all development work, including an imminent Phase IIb trial for which Arakis and Vectura already had raised funds.

The companies also would receive royalties on sales of AD 237 as a monotherapy, and on a second proposed product in which AD 237 is combined with QAB149, Novartis' beta² agonist, in Phase II trials.

Chris Blackwell, CEO of Vectura, told BioWorld International: "This is a fantastic deal; we are very pleased with the value. We have done a single deal with Novartis and under our agreement with Arakis we will share revenues 50-50."

While the $545 million deal between Immuno-Designed Molecules SA, of Paris, and Sanofi-Synthelabo SA agreed to in January 2002, and London-based Antisoma plc's $500 million agreement with Basel, Switzerland-based F. Hoffmann-La Roche Ltd. signed in November of that year, both have bigger headline values, they cover multiple products.

Before the Arakis/Vectura license, the biggest European signing for a single product was Basilea Pharmaceutica AG's $302 million deal with Cilag AG International (part of Johnson & Johnson) for ceftobiprole, a broad-spectrum antibiotic, agreed to in February.

AD 237, a once-daily muscarinic agonist, already is approved in a non-respiratory indication. Its potential in treating COPD was spotted by Arakis, based in Saffron Walden, UK. The firm specializes in finding new uses for existing drugs by advancing the understanding of disease pathology and assessing its relevance to registered drugs, re-profiling drugs to fit new biological knowledge.

Arakis signed the joint venture deal with Bath, UK-based Vectura in 2000, to develop the compound using Vectura's inhalation technology.

In the Phase IIa trial of AD 237, involving 45 patients, there were clinically significant increases in lung capacity measurements with a clear dose response and good tolerability at all doses.

On the back of the Phase IIa data, Vectura floated on London's Alternative Investment Market in June 2004. Blackwell said that, aside from the cash, the deal with Novartis is important because it demonstrates Vectura's low-risk model works. "It also shows we can take these products to a pharmaceutical company, negotiate with them and come out with a deal," he said.

The up-front payment from Novartis, plus the fact that Vectura no longer will be paying for the Phase IIb study of AD 237, will allow the company to expedite some of its other program and look at acquiring products.

As far as Arakis is concerned, the deal gives it cash through the end of 2007, and provides a platform to float the company at some point.

"We have publicly stated there are a number of internal, clinical and commercial milestones for us prior to considering an IPO," Peter Keen, Arakis chief financial officer, told BioWorld International. "If the market is ready and we have achieved these milestones, we will look in due course at providing our shareholders with an exit."

Having worked together for four and a half years, with a joint project team developing AD 237 and a joint steering committee deciding the budget and setting deal parameters, Arakis and Vectura now are establishing a new joint body to monitor Novartis' progress with AD 237.

"This has been a classic collaboration: The fact there are two companies was never an issue - we negotiated jointly and presented a united front to Novartis," Keen said.