Vernalis and GlaxoSmithKline have linked arms under an exclusive collaboration, option and licensing deal regarding the former group’s research programme against a secret cancer target.

The alliance will see Vernalis applying its know-how in Structure Based Drug Design technologies to generate new development candidates against the target and, on the filing of an IND, GSK then has the option to cherry pick any of the candidates for future development.

Under the terms of the deal, Vernalis gets a signing fee of $6 million, which includes a $3 million equity subscription by GSK for 2,040,542 new ordinary shares at 87p each, and also stands to receive up-front and potential milestone payments in excess of $200 million as well as future double digit royalties if any oncology products generated by the partnership make it to market.

Commenting on the deal, Ian Garland, Vernalis’ Chief Executive Officer, said: “The risk sharing structure of today’s deal allows us to achieve our research funding goal but to also retain a significant upside from successful development of this novel Vernalis oncology programme”.

Healthy interim results
Meanwhile, Vernalis booked a fairly healthy looking set of interim results for the six months to June 2009, in which growing sales helped to further reduce losses.

The group’s sales rocketed 72% to £5.7 million compared to the year-ago period, largely driven by revenues of Frova (frovatriptan) in Europe which climbed to £2.7 million from £1.9 million in the first six months of last year, as well as leap in collaboration income to £3 million from £1.4 million.

The growth in sales, plus a 20% drop in research and development costs to £7.2 million, amongst other factors, helped slash operating losses for the six-month period to £5.3 million compared to £9.6 million last year.

According to the company, a successful fundraising earlier this has helped it find “a much firmer financial footing” and the cash due from its new deal with GSK should help provide enough funds until mid 2011.

Shareholders have evidently welcomed news of the deal and the group’s results as its stock, traded on the London Stock Exchange, had already climbed 7% in early-morning trading.