BASEL, Switzerland—Swiss drugmaker Novartis AG announced last month a research and development collaboration with Manchester, U.K.-based epithelial stem cell contract research organization (CRO) Epistem PLC aimed at exploring disease opportunities in regenerative medicine.
The partnership, valued at up to $50 million, will combine Epistem's stem cell expertise and drug discovery program with Novartis' insights into disease pathways and bioinformatics to identify the key regulators of epithelial stem cells and develop novel new therapies targeted at epithelial diseases.
Under the terms of the agreement, Novartis will pay Epistem an upfront cash payment of $4 million and will provide research funding for two years.
Novartis has an option to exclusively license targets for development of biotherapeutic products in exchange for license fees, milestone payments and royalties. For each product developed from targets licensed under the agreement, Epistem is eligible to receive up to $45 million in milestones. Additionally, if leads are commercialized, Epistem is eligible to receive tiered royalties on worldwide sales.
For Novartis, the deal will boost its efforts to develop therapies on a global basis by stimulating its efforts in the area of regenerative medicine, says Chuck Wilson, global head of strategic alliances at the Novartis Institutes for BioMedical Research (NIBR), the company's global pharmaceutical research arm.
"We think there are a lot of general principles in stem cell biology and regenerative medicine that have potential for many different indications, and this partnership is a starting point for exploring that potential," Wilson says. "Epistem brings very unique know-how to the table with its epitheal stem cells, and we are looking to derive as much value as possible through the partnership."
Founded in 2000 by a team of international experts in epitheal tissue, tumors and stem cell control, Epistem was originally formed part of the Paterson Institute for Cancer Research in the U.K. The company's scientific foundation is based on co-founder Professor Chris Potten's groundbreaking stem cell research over three decades at the Paterson Institute which identified and characterized the location and behavior of stem cells in the intestine, skin, hair follicle and breast.
The epithelium provides a barrier between the body and its environment. The lining of the intestine consists of a single layer of cells that secretes and absorbs substances during digestion. It undergoes continuous renewal; the finger-like villi in the small intestine in humans completely regenerates each week. While the regulators that control epithelial stem cells in the body remain unknown, Epistem's focus is on discovering these regulators and developing new therapeutics that modulate the body's own stem cells to protect and repair epithelial tissues in patients. Epistem does not conduct research into embryonic stem cells or stem cell transplantation.
As Epistem developed its drug discovery program, offering its services on a "fee-for-service" basis, it became obvious that the size and depth of the program required a "world-class" partner who had a strong molecular pathway understanding to complement its cell biology expertise, says Epistem CEO Matthew Walls.
"We talked with most of the top-tier groups, but Novartis was quick to recognize the developments to date and the obvious fit with their molecular pathway group to identify the key regulators of epithelial stem cells," Walls says. "Epistem is focused on the body's own stem cells and the identification of novel therapies that can regulate these stem cells in situ. This strategy was closely aligned with Novartis' approach to regenerative medicine."
Leads generated by Epistem will be aligned with the company's focus on the broad epithelial disease areas of oncology, oncology supportive care (mucositis), inflammatory bowel disease and dermatology, Walls says.
"Each party will play to its respective strengths base on the core expertise of the groups," Walls says. "We will be working closely with Novartis for the next few years in order to ensure that the collaboration is a success. We will evaluate our next steps towards the end of this period."
The deal also secures Epistem important future funding. Investment bank and institutional securities firm Piper Jaffray said the cash inflow should be sufficient to fund all of Epistem's internal R&D, making the business profitable in 2009. Following the news, shares in the company jumped 20 percent to a record high of 288 pence, valuing it at around $30 million.
