Concert Pharma To Get $300M+ Per Drug in Celgene Pact

Xconomy Boston — 

The past 15 months have turned into a partnership symphony for Concert Pharmaceuticals.

On Monday, the Lexington, MA-based company snagged its latest collaborative partner, revealing that it will team with Celgene (NASDAQ: CELG) to use its technology— which adds deuterium elements into existing drugs to boost their abilities—to develop cancer and inflammation drugs.

Concert has now formed three high-profile partnerships with its technology since February 2012, having already struck similar pacts with Jazz Pharmaceuticals (NASDAQ: JAZZ) and Avanir Pharmaceuticals (NASDAQ: AVNR).

“Really this is, for us, a story of momentum and maturation of our technology,” says Concert CEO Roger Tung, of the string of partnerships.

But the Celgene deal has the potential to be Concert’s biggest haul to date, depending how things pan out, because Concert could receive a nine-figure check for each of several drugs the two develop through the partnership.

Initially, Concert will get an unspecified upfront payment while the two work on one unnamed drug, but the partnership could expand significantly from there. Should Celgene buy in to Concert’s technology and “exercise its program options,” Concert could get up to $300 million in development, regulatory and sales milestones for each drug the Summit, NJ-based biotech utilizes Concert’s technology to help develop and advance, as well as royalties should Celgene ultimately ever sell those drugs. Concert provided little additional information about the drugs the two will develop, only indicating that the two companies will target the areas of cancer and inflammation, and Tung declined to specify further on Monday. RBC Capital analyst Michael Yee speculated in a research note Monday that one of the drugs is Concert’s CTP-221, a deuterium-modified version of Celgene’s blockbuster myeloma drug lenalidomide (Revlimid). Concert said in December that it expects to finish pre-clinical testing of CTP-221 and seek FDA clearance to begin clinical trials in 2013.

Roger Tung, CEO of Concert Pharmaceuticals

Tung says Concert will meet with Celgene on a regular basis and as Celgene judges the potential of the technology to help develop its various products, it will decide whether to either expand the terms of the collaboration or not. The two will then use Concert’s technology to infuse deuterium into drugs that they have an interest in.

“We’re confident that what we’ll see is substantial benefits associated with deuterium modification as we have with other partner programs in our own hands,” he says. “So we think there’s a good likelihood that this can continue to expand.”

Concert’s drug development hook is its use of deuterium, a relative of hydrogen—the two are the same size and shape—that is derived from water. Concert’s idea is to take existing drugs proven to be safe and swap the hydrogen atoms within them with deuterium atoms, changing how they are metabolized by the body. The intent is to make drugs that can be more potent, or have fewer side effects or drug-drug interactions.

That thesis has helped Concert attract its share of partners. GlaxoSmithKline signed a deal with Concert in 2009 to see if deuterium modifications could help the British company develop a new type of protease inhibitor. Though that partnership didn’t pan out the way the two had hoped, Concert has found more believers since the beginning of 2012. In February of that year, Avanir agreed to pay as much as $200 million for a worldwide license to use Concert’s technology to boost its drug for pseudobulbar (PBA), a condition that causes involuntary outbursts of crying or laughing. By adding deuterium to the drug, which is a combination of dextromethorphan and quinidine sulfate (Nuedexta), Avanir hopes to remove some of the quinidine—which has some potential cardiac side effects associated with it—from the equation, according to Tung.

And just three months ago, in February, Jazz tapped Concert’s technology to create a souped-up version of its narcolepsy drug, sodium oxybate (Xyrem). Jazz paid an unspecified figure up front and promised another $120 milion in future payments. Those partnerships have helped keep Concert humming along as it pushes its own drug, CTP-499, through clinical trials without any new equity funding since 2008.

“That is part of the strategy of the company,” Tung says, adding that the goal has been to use partnerships to generate enough cash to get CTP-499 into mid-stage clinical trials.

Concert recently completed enrollment of a 24-week, 182-patient mid-stage study of CTP-499 for patients with diabetic nephropathy, a form of kidney damage that results from diabetes. Concert expects data from that trial by the end of the year, at which point the company will likely return to the capital markets for further funding to gear up for a large, late-stage study, according to Tung.

At that point, the value of Concert could swing dramatically.

Concert holds full rights to CTP-499. It is also developing a drug behind CTP-499 for nerve pain and anxiety. Concert hopes to get the nod from the FDA later this year to begin clinical trials of the drug, known as CTP-354.

“Where we’re moving toward I hope is to be a product-producing organization that in the fullness of time I would like to see evolve into a fully integrated research, development and commercial organization,” he says.

Celgene, meanwhile, continues to wheel and deal. Just last week it agreed to pay Forma Therapeutics $200 million to get international rights to the Watertown, MA-based company’s protein homeostasis-based drugs. That followed partnerships with companies such as South San Francisco-based Sutro BioPharma, Cambridge, MA-based Agios Pharmaceuticals, and Seattle-based VentiRx Pharmaceuticals, among others.