In its most recent deal to purchase options for early-stage developmental drugs, GlaxoSmithKline has paid Dynavax $10 million upfront for a worldwide strategic alliance to develop endosomal toll-like receptor drug candidates in four autoimmune and inflammatory disease areas.

Berkeley, Calif.-based Dynavax will conduct research and early clinical development in programs targeting diseases including lupus, psoriasis and rheumatoid arthritis using its proprietary immunoregulatory sequences (IRS) technology. GSK obtains the exclusive option to license each program at proof-of-concept, or earlier if certain circumstances occur.

Upon exercising its option on a candidate, GSK will take over development and commercialization activities, with Dynavax getting tiered royalties up to double digits, the two firms said Dec. 17. Dynavax, which could realize milestones up to $200 million apiece in each of the four programs, also retains the option to co-develop and co-market one pre-specified product.

IRS compounds are oligonucleotide-based endosomal TLR inhibitors. DV1079, a bifunctional inhibitor of TLR7 and TLR9, is the company's lead IRS molecule; it is slated to enter clinical development by the fourth quarter of 2009, Dynavax says.

A "transformational" partnership

During a same-day investor call, Dynavax CEO Dino Dina said the IRS compounds improve on previous TLRs because they selectively block production of B cells and plasmacytoid dendritic cells through the TLR7 and TLR9 pathway, and don't appear to cause broad immunosuppression. In preclinical studies, the inhibitors produced significant reduction of lupus symptoms, he said.

Dina called the partnership with GSK "a transformational event" for Dynavax and said biologics to treat lupus, psoriasis and RA represent a $15 billion opportunity worldwide. "The alliance will allow us to diversify and advance a very valuable pipeline of products that target significant unmet needs," he said.

That's likely to be the case even if GSK ultimately declines the option on Dynavax's drug. Although modest in size, the upfront payment provides the biotech with critical near-term, non-dilutive funding. During its third-quarter financial call Nov. 3, Dynavax said it had cash, cash equivalents and securities on hand totaling $64.3 million as of Sept. 30. However, the biotech also reported operating expenses of $51.3 million over the first nine months of 2008.

This most recent deal gives Dynavax a small financial cushion that will allow it advance DV1079 without sacrificing ongoing efforts related to Heplisav , a hepatitis B vaccine that was placed on clinical hold by FDA in March due to a serious adverse event of systemic vasculitis in a Phase III trial (¹ Also see "Dynavax’s Vasculitis Case With Heplisav Could Be Random" - Pink Sheet, 18 September, 2008.). Dynavax is partnered with Merck on that program, and also has ongoing collaborations with AstraZeneca and Novartis.

Moreover, given the pipeline pressures of Big Pharma companies, assuming positive data associated with DV1079, it's unlikely there will be the stigma of "tainted product" attached to the program if GSK ultimately declines the option.

Case in point: Exelixis. In October, GSK declined its option on Exelixis' small molecule oncologic XL184, ending a six-year R&D partnership that brought the latter firm an estimated $260 million in funding, including an $85 million loan (² Also see "End of an Era for GSK and Exelixis" - In Vivo, 1 November, 2008.).

Exelixis regained all rights to XL184, which currently is in clinical trials as a treatment for medullary thyroid cancer, glioblastoma multiforme and non-small cell lung cancer, along with four earlier-stage compounds. The biotech quickly partnered the molecule, along with an earlier-stage compound, with long-term partner Bristol-Myers Squibb for $240 million in assured payments plus a major co-development and marketing role (³ Also see "Love The One You’re With: BMS Pays Exelixis $240M Upfront In New Cancer Drug Deal" - Pink Sheet, 12 December, 2008.).

GSK continues with option strategy

For London-headquartered GSK, meanwhile, the Dynavax transaction represents the continuation of a business development strategy that relies heavily on option-based deals. Such deals involve a relatively minimal upfront commitment for the global pharma, allowing it to hedge its financial exposure until the R&D risks are known more fully.

In addition to its 2002 deal with Exelixis, GSK also has inked option arrangements with Cellzome, Affiris, Anacor, NeuroSearch, Regulus Therapeutics and OncoMed, according to FDC-Windhover's Strategic Transactions database.

In September, GSK paid Germany's Cellzome $25.3 million upfront for a license to four anti-inflammatory kinase inhibitors in a deal that eventually could be worth more than $200 million. There also is the potential for the two companies to jointly select three additional kinase targets for investigation (⁴ [See Deal]).

More recently, GSK gave Austria's Affiris $29.1 million upfront for two Phase I Alzheimer's disease vaccine candidates, along with the option to purchase the biotech's preclinical vaccines for the disease (⁵ [See Deal]).

-Joseph Haas (j.haas@elsevier.com)

GSK, Dynavax To Partner On TLR Compounds In Autoimmune, Inflammatory Disease

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