Vertex Pharmaceuticals Inc. (VRTX) recently announced a worldwide licensing agreement with Alios BioPharma, Inc. for the latter’s hepatitis C candidates ALS-2200 and ALS-2158. Both candidates are currently in preclinical trials and data from in vitro studies demonstrated that both had a synergistic effect when combined together and also when combined with Vertex Pharma’s Incivek (telaprevir) and VX-222. Moreover, both candidates showed antiviral activity across all genotypes, or forms, of the hepatitis C virus (HCV) in the in vitro studies.
According to the agreement, Vertex Pharma will make an upfront payment of $60 million to Alios in return for worldwide rights to ALS-2200 and ALS-2158. Vertex Pharma will also pay the development costs of ALS-2200 and ALS-2158 along with providing research funding to Alios. Additionally, on approval of both compounds, Alios is eligible to receive R&D milestone payments of up to $715 million and sales milestone payments of up to $750 million on sales of all approved medicines under the collaboration. Alios will also receive tiered royalties on product sales.
We note Vertex Pharma expects to pay about $35 million in development milestones in 2011.
As a part of the licensing agreement, Vertex Pharma also has the option to select compounds emerging from the research program, for development.
The companies plan to commence clinical studies with the candidates in the fourth quarter of 2011. Results from these studies will help in the initiation of mid-stage trials by the end of 2012. Vertex Pharma and Alios also plan to evaluate multiple combination regimens of ALS-2200, ALS-2158, Incivek and VX-222 in the phase II trials, in order to generate sustained viral response (viral cure) data.
The companies plan to provide additional details on the clinical development program for ALS-2200 and ALS-2158 later in 2011, once the first clinical study commences.
Our View
We currently have a Neutral recommendation on Vertex Pharma, which carries a Zacks #3 Rank (short-term Hold rating). We believe that the addition of ALS-2200 and ALS-2158 to the company’s pipeline will strengthen its HCV portfolio, which includes drugs like the recently approved Incivek and phase II candidate VX-222.
We note that Vertex Pharma has exclusive US commercialization rights to Incivek and has joined hands with Johnson & Johnson (JNJ) and Mitsubishi Tanabe Pharma for the commercialization of the drug outside the US. While Johnson & Johnson is responsible for the commercialization of Incivek outside North America and the Far East, Mitsubishi Pharma will market it in certain areas of the Far East including Japan.
Moreover, the drug is currently under regulatory review in the European Union and Canada. Johnson & Johnson anticipates a response from the European regulatory body in the second half of 2011.
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