BioWorld International Correspondent

LONDON - Vernalis plc sealed its first deal since the formation of the company from British Biotech plc, RiboTargets Ltd. and Vernalis plc, signing a cancer research collaboration with Novartis Institutes for BioMedical Research Inc.

Tony Weir, finance director at Vernalis, told BioWorld International: "When we reorganized the company to focus our research on oncology and neuroscience, we said we would do a deal in each of these areas. It does not come any better than a deal in oncology with Novartis. This is an important validation of Vernalis as a company and of the kind of research we are doing."

The deal involves an initial six-month evaluation period during which the institute, located in Cambridge, Mass., will conduct its own research and pay for further research at Vernalis' UK laboratories. Following that, there is an option to enter a longer-term research and development agreement.

No financial details were given, but Weir said the longer-term deal already was defined and agreed, including its value, so there would be no need for further negotiations if Novartis decides to go ahead.

The collaboration centers on inhibitors of a target that is implicated in the progression of a range of disorders. That too, was not disclosed, but Weir said the project would draw heavily on the structure-based drug discovery technology that came from RiboTargets.

If Novartis extends the collaboration, it may make an equity investment in Winnersh, UK-based Vernalis.

Weir said Vernalis also is making good progress in negotiating a parallel deal in neuroscience.

The process of integrating Vernalis, British Biotech and RiboTargets is almost complete, he said.

"We have defined how the business will look, and the final implementation will be completed in the first quarter of 2004," Weir said.

British Biotech announced its £48 million (US$79.8 million) all-share takeover of Vernalis in July. Three months earlier, British Biotech took over RiboTargets in a deal that valued the privately held company at £24 million. Combined headcount at Vernalis will fall from 271 to 135, and there will be annual savings of £13 million.

Vernalis is interested in further merger and acquisition activity. "It is an ongoing part of the strategy, and the process of looking for suitable companies is always under way," Weir said. "We were able to integrate RiboTargets and Vernalis very quickly; it has been a very busy year, but great fun."