Shire ($SHPG) has picked up a stake in Chronos Therapeutics. The equity stake is one component of a broader deal that sees Shire give three central nervous system (CNS) programs to Chronos in return for milestones and an opportunity to buy back the drugs under certain circumstances.
Through the agreement, Oxford, U.K.-based Chronos has added preclinical programs against fatigue in multiple sclerosis, addictive behaviors and post-traumatic stress disorder to its pipeline. As the drugs advance, Shire is in line to receive milestones and royalties, although neither company has disclosed how much is at stake. Shire also has a right of first negotiation on each program. And, if Chronos fails to invest preagreed amounts in the assets, Shire can reacquire the drugs.
This structure ensures that Shire will profit from the programs if they advance, while also giving it the option to buy the drugs back if they start to look particularly promising or Chronos fails to hold up its end of the deal. Notably, Shire gains potential future paydays without committing in-house resources to early-stage programs at a time when it is occupied with digesting Baxalta following its $32 billion (€29 billion) acquisition.
The option to cut drugs from crowded in-house pipelines while retaining the ability to profit if they go on to succeed has proven popular with companies other than Shire. Novartis ($NVS) struck a similar deal last year with Mero BioPharma (LON:MPH), a company founded on the idea that Big Pharma companies have more pipeline prospects than they can develop. The deal saw Mereo gain three assets and an equity investment from Novartis in return for milestones and royalties.
For Chronos, the deal represents a way to immediately broaden its pipeline beyond preclinical amyotrophic lateral sclerosis asset RDC5. Chronos has been keen to achieve such a broadening since the start of 2015.
“[The deal] came as a part of a deliberate strategy on our part,” Chronos CEO Huw Jones told FierceBiotech.
Having executed the first part of this plan, Chronos is looking to take on staff to run the acquired programs. A pair of senior hires are due to be unveiled next week, moving Chronos a step closer to the day when it can properly push on with development of the programs. Once that work gets underway, Chronos will advance the three programs simultaneously, a model that reflects the fact that each of the drugs is at a similarly early stage of development.
“We've got to get through the various proofs of concept in the preclinical world … and then take it from there,” Jones said. With these assorted preclinical barriers to clear, Jones is shying away from committing publicly to a target for advancing any of the programs into the clinic.
As it sets out in this process, Jones said Chronos, which last raised money late in 2013 through an £8 million round, is “quite well funded” relative to its needs as a preclinical CNS biotech, although it will need to raise money at some point, “both for pushing a little further and for other acquisitions.”
The pursuit of acquisitions is continuing in the wake of the Shire deal. "We're still acquisitive. Our search continues for complementary assets in the CNS space, both in degenerative and behavioural brain disease,” Jones said. Chronos is open to extending the dealmaking activity to early-phase clinical programs. “We have a couple of evaluations ongoing at the moment which are exactly that," Jones said.
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