Shares in UK drug giant GlaxoSmithKline closed up 1.8% at $54.88 on the New York Stock Exchange yesterday, as investors were cheered by news that the firm has signed a deal with privately-held group ChemoCentryx for the development of new treatments for inflammatory and autoimmune diseases.
In what marks a massive deal for ChemoCentryx on all counts, GSK will make an upfront payment of $63.5 million to the firm, as well research funding and subsequent milestone payments of up to a whopping $1.5 billion. In return, the US group will use its expertise on the chemokine system, which plays a key role in inflammation, to discover new drug candidates for GSK, which then has the option of licensing them.
In addition, ChemoCentryx is due a double-digit royalty percentage if any products borne from the partnership make it to market, and GSK has promised to invest in the firm, under certain undisclosed circumstances, should it go public.
Commenting on the deal, Thomas Schall, chief executive of ChemoCentryx, said: “This important alliance with GSK will provide us with access to significant capital in the near and long term to support the ongoing development of each of these programs, as well as the ability to continue to discover and bring forward multiple new compounds targeting the chemokine system.”
But the move is also a positive for GSK, which will gain access to cutting-edge science to breathe new life into its R&D pipeline. “Accessing [ChemoCentryx’] expertise and four advanced chemokine programmes, including, Traficet-EN in the clinic for IBD [irritable bowel disease], will allow us to bring novel medicines to patients with high unmet need,” commented Maxine Gowen, senior vice president and head of GSK’s centre of excellence for external drug discovery, the vessel for the partnership.
The deal marks a growing trend where pharmaceutical big boys are signing deals with smaller specialist companies to tap into their areas of expertise and boost innovation. And yet, JP Garnier, chief executive of GSK, seems to think the top pharmaceutical companies are still not paying enough attention to their R&D. In a recent interview with Manager Magazin, he said that many companies are choosing to sink large portions of cash into marketing and advertising their products instead of their R&D and production activities.
And he predicts that the consequences of this could be pretty dire. “From 15 pharmaceutical companies that are important today, only a handful will probably survive,” he warns. “Hardly any of the large companies are in a position right now to invest enough money into research,” he concluded.