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Merck ups autoimmune prize to $600M for small Michigan biotech

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Lycera CEO Kathleen Metters--courtesy of Lycera

Merck has essentially doubled down on its discovery deal with Ann Arbor, MI-based Lycera, a biotech spinout from the University of Michigan following their own unique pathway to mount a therapeutic assault on autoimmune diseases.

Close to two years ago Merck ($MRK) paid $12 million upfront and promised up to $295 million in milestones to buy into Lycera's development work on small molecules that target T-helper 17--or Th17--cells, which they believe offer a new, first-in-class approach to treating major autoimmune diseases such as rheumatoid arthritis, psoriasis, inflammatory bowel disease and multiple sclerosis. Today Lycera announced that Merck has doubled its promised milestone package to close to $600 million, expanding the original deal to add new targets to its roster.

Merck, as is often the case, kept many of the details of this deal under wraps. Lycera is not at liberty to discuss how far along its work is, exactly what targets are on their radar or even how big the second upfront was. Typically, though, discovery pacts bring relatively small down payments with much of the money up for grabs much later in the clinic or at the regulatory and commercial level, often years down the road.

Merck's second deal clearly signals its belief in Lycera's work, though. The company was founded on the work that Gary Glick--Lycera's CSO--did at the University of Michigan. Based on some original animal studies, he believes that inhibiting retinoic acid related orphan receptor (RORγt) they can take the Th17 path to reining in IL-17, a well-known player in autoimmune ailments.

Lycera is following a different path for its in-house work on autoimmune diseases, CEO Kathleen Metters tells FierceBiotech. The biotech, which picked up a $36 million A round in 2009, should move into the clinic with its own candidate in the next 12 to 18 months. Metters is also playing her cards close to her vest, declining to answer whether the company will be looking for a new venture round anytime soon. Lycera's staff had grown to the mid-20s and Metters expects it to continue to grow incrementally.

- here's the press release

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