“An offer we couldn’t refuse”

Douglas Ringler has had a front-row seat to biotech’s deal-making show recently. And he’s impressed with the numbers he’s been seeing.

The CEO of Tolerx, Ringler was on the receiving end of a $760 million package of upfront fees, milestones, equity and research expenses announced this week with GlaxoSmithKline for one of the leading CD3 antibodies in development. $70 million of that is being handed over upfront. That’s an eyebrow-raising sum of money, which is being proffered just as TRX4 (otelixizumab) is lining up to begin a late-stage study. And according to Ringler, he wasn’t working all that hard to sign up a partner.

“We had always planned to not partner the product and take it as far as we could by ourselves,” says Ringler about TRX4, which had gained enough attention to earn several unsolicited calls from would-be suitors. “A number of companies expressed considerable interest in this area. This was an offer we couldn’t refuse.”

There’s more than money involved in Tolerx’s deal package. The company keeps an option on co-promotional rights to the U.S. market for type 1 diabetes. The deal was announced just days after MacroGenics announced its own rich package with Eli Lilly for its CD3 molecule. And the two companies are being watched closely to see which can get the first approval.

“It’s always a nice place if you can get to market first,” says Ringler. “And that’s absolutely our intention. We don’t comment on our competitor, but we are very comfortable with our position. From the standpoint of intellectual property and where we are in the drug development timeline, we are the only company that completed dose optimization with a CD3 antibody, the only one that’s been used in a double-blinded Phase II trial in new onset type 1 diabetes. Our product is the only one that has completed such a well controlled trial. We’re very comfortable that we can protect our market and we can protect our position where we are on the drug development timeline because of the work we’ve done so far.”

Of course, Eli Lilly and MacroGenics are feeling pretty good about their own CD3 molecule deal--which also involves some big numbers. In that pact, Lilly put up $44 million and promised $450 million in potential milestones for an approved product to fight type 1 diabetes. Additional approvals could be worth $600 million.

Tolerx and Glaxo are working now on hammering out a consensus with the FDA on a protocol for the Phase III trial, which is expected to begin in the first quarter of ‘08. Add another two to three years, Ringler says, for researchers to complete the trial and file a BLA. And with the Glaxo agreement under its belt, the CEO says the company has the money it needs to get all the way through to an application. That can be a welcome breathing space for a company that has moved twice to go public, only to pull back each time.

“I think that the beauty of the GSK deal is that it allows us to design the timing of any subsequent public transaction,” adds Ringler. “There’s no urgent need to raise capital.”

A lot is riding on TRX4. The mab adheres to a receptor on T cells and inhibits the function of autoreactive T cells, protecting patients from autoimmune diseases and promoting immunological tolerance. As such, it can be used to treat type 1 diabetes, psoriasis, rheumatoid arthritis and other autoimmune diseases.

If it works, it theoretically can be used without fear of serious side effects. This is the kind of therapy that can command major markets--and justify the size of the bounty that GSK has put on the table.