Novartis Plugs Gaps in Pharma Pipeline

Novartis AG hopes that Vertex Pharmaceuticals Inc. 's structure-based drug design will deliver at least eight product candidates—already vetted for market size and validated in early-stage clinical testing—into its development pipeline in the next six years. That's the target for their new alliance, under which Novartis is providing Vertex $200 million in laboratory research funding over six years and another $200 million in the form of an interest-free loan to conduct preclinical and clinical proof-of-concept testing of small-molecule protein kinase inhibitors Vertex identifies using its high-throughput chemogenomics platform [See Deal].

In exchange, Novartis gets to select for commercialization up to eight product candidates which meet its criteria—including a market size of over several hundred million dollars each. Novartis will forgive that portion of the loan applied to each compound it accepts for development (up to $25 million per compound), plus it will pay Vertex license fees and development milestones on each compound. According to Vertex president and CEO Josh Boger, PhD, his company could receive $600 million of the $800 million maximum dollar total prior to commercialization, which would set the value of the alliance above the $465 million benchmark for target deals set by Millennium Pharmaceuticals Inc