Deuterium discovery deal

GSK and Concert Pharmaceuticals to develop deuterium-modified drugs in deal worth up to $1 billion

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LONDON—GlaxoSmithKline plc will collaborate with Concert Pharmaceuticals, a clinical-stage biotech focused on the application of deuterium chemistry to create novel, small-molecule drugs, on the development and commercialization of deuterium-modified drugs, the companies announced last week. Including milestone payments, the deal could bring Concert $1 billion for its R&D programs.

The deal includes three of Concert's research and development programs; namely, CTP-518, a protease inhibitor for the treatment of HIV expected to enter Phase I clinical trials in the second half of 2009, a preclinical compound for chronic renal disease, and a third, unspecified research product in Concert's pipeline. Concert will also provide GSK with deuterium-modified versions of three GSK pipeline compounds for GSK to develop.

Under the terms of the agreement, Concert will receive $35 million in upfront payments, including a $16.7 million equity investment by GSK. Concert is eligible to receive milestones and tiered, double-digit royalties based on deuterium-containing products arising from the Concert pipeline programs. In addition, Concert is eligible to receive milestones as well as royalties on the sales of deuterium-containing products arising from the GSK pipeline compounds. Overall, Concert has the potential to receive in excess of $1 billion in total milestone and upfront payments from GSK spread across all programs
For each Concert pipeline program, Concert will have responsibility for research and development activities through completion of pre-agreed clinical trials. After the completion of clinical trials for each program, or earlier if it chooses, GSK may elect to obtain an exclusive, worldwide license to product candidates within the program. GSK will assume responsibility for development and commercialization, while Concert will retain full rights to further develop and commercialize its product candidates in any program GSK chooses not to license.

With GSK's continued focus on HIV therapies—an effort boosted recently by GSK's partnership with Pfizer on HIV drug development—the agreement fits into the company's goal of accessing "the best science and technology platforms worldwide," says Janet Morgan, a GSK spokeswoman.

"In keeping with our strategy of seeking external collaborations and forming alliances, we were looking for different scientific approaches, and what Concert is doing came to our attention," says Janet Morgan, a GSK spokeswoman. "Concert has a very promising technology that could work across a wide range of diseases."

Dr. Roger Tung, Concert president and CEO, added that the collaboration is a major step forward in the Lexington, Mass.-based company's strategy to advance a broad pipeline of novel deuterium-modified therapeutics. Since it was founded in 2006, Concert has raised more than $110 million from venture capitalists and institutional investors, including SR One Ltd., GSK's healthcare venture fund, as well as Brookside Capital Partners Fund, TVM Capital, Three Arch Partners, Fidelity Investments, Skyline Ventures, Flagship Ventures, Adage Capital Management, Greylock Partners, New Leaf Venture Partners, QVT Fund, Mediphase Venture Partners, Westfield Capital Management and Alexandria Equities LLC.

"Our approach is one that has resonated well with investors," Tung says. "Deuterium has been explored by other companies, but always in the context of a particular program. We believe this has the potential to have a lot of applications across a variety of small-molecule therapeutics."

A non-radioactive relative of hydrogen that can be isolated from sea water, deuterium is heavier than hydrogen, forming a stronger chemical bond to a carbon atom of a molecule. This bond obtained by selective deuterium modification may substantially improve the drug's metabolic properties, potentially resulting in better safety, tolerability and/or efficacy of an isotope of hydrogen.

Deuterium has been used extensively in human metabolic and clinical studies. According to Concert, CTP-518 has the potential to be the first HIV protease inhibitor to eliminate the need to co-dose with a boosting agent. Current standard of care is to co-administer HIV protease inhibitors with ritonavir, which is associated with significant complications. CTP-518 replaces certain key hydrogen atoms of atazanavir with deuterium. In preclinical studies, Concert has demonstrated that selective deuterium modification of atazanavir fully retains its antiviral potency but can markedly slow hepatic metabolism, thereby increasing half-life and plasma trough levels.

To date, Concert has filed more than 100 patent applications on deuterium-substituted drugs. Several of these patents would cover the drugs as new chemical entities, which would give GSK and Concert a competitive edge and gird against the patent cliff facing Big Pharma in the next few years.

"There is obviously an advantage to compounds that are deuterated, because a new chemical entity is created," Morgan says.

Two of the patents have been approved, Tung says, adding, "We're just starting to see the first trickle, as it takes four to five years to get patents through the U.S. Patent and Trademark Office."

Many pharma industry analysts praised the companies for giving deuterium a fair hearing, but acknowledged some downsides.

"No one's taken such a compound all the way through development, and every one of them is going to be different," Biotech industry commentator Derek Lowe wrote in his recent Corante blog. "I can tell you that this is the sort of idea that has surely occurred to many other pharma researchers over the years, who've thought about it a bit and said, 'Nah … someone else must have tried that already.' If this works (and it's already working to the tune of many tens of millions of dollars, at any rate), you can be sure that every other drug company will batten down its patent filings from here on out to make sure that they own the deuterium versions of their new drug candidates. For now, Concert (and their competitors in the deuteration business) have been filing patents on every existing drug they can think of where the technique might show a benefit. My guess, though, is that everything that's usable has been claimed by now."

Tung acknowledges that criticism, but says, "The success we are starting to see in our fundraising and business development is bringing more attention to deuterium-modified drugs, but we have the advantage of being in the field for three years and having an industry-leading position. We hope we will retain that for some years to come."

Some analysts balked at the potentially high price tag of the deal, although most agreed that the initial payments to Concert will temper any eventual milestone payments.

"The deal's milestones total more than $1 billion and are heavily weighted to the three option candidates," wrote In Vivo Blog commentator Chris Morrison. "What's more, the majority of the payments are for clinical and regulatory accomplishment, as opposed to sales-based payments."

Tung says the deal's structure is indicative of GSK's confidence in the deuterium program.

"We believe it is advantageous to both parties because we are starting with compounds we believe are pharmacologically the equivalent to many compounds that are already on the market," he says. "The deal is structured to offset GSK's risk of the compounds not working, and because we believe that risk is low, they have rewarded us for that. During these dicey economic times, we believe that we have been able to attract what would in the best of times be considered a very favorable partnership that speaks to the attractiveness of our technology and its potential to be a very attractive economic approach. Notwithstanding the difficult current climate, we are very well-positioned to be pioneers in this field and leaders in a new area of medicinal chemistry."

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