Novartis Out, Merck In, a Win for Vertex's Aurora Kinase Program

Earlier this year, Vertex and Novartis reworked their 2000 deal covering R&D of drugs against kinases. The shift has already proved consequential. Vertex had yet to present a compound to Novartis: the original arrangement called for Vertex to conduct all R&D through early clinical proof of concept and the most advanced molecule, VX-680, was just at IND filing. With Novartis unwilling to decide on VX-680 before seeing clinical data, as part of the renegotiation Vertex was able to regain control of the compound then license it to Merck. For that compound, at least, Vertex got from Merck what it couldn't get from Novartis: significant value and an earlier handoff of an asset.

Most biotechs strive to get a lead molecule into the clinic at all costs, building a clinical development infrastructure to establish product value, make the firm more attractive as an in-licensor, and in many cases help create a niche franchise. Discovery-oriented Vertex Pharmaceuticals Inc. , however, has long adopted a contrarian risk-reducing alliance model. It has sought to maximize the number of programs it can put into drug development, largely through partners--often to the dismay of Wall Street, which sees a strategy rooted in outlicensing of promising preclinical compounds as giving up value too early. To make up for the value it sacrifices by foregoing full commercialization, as well as the risks that its partners might slow development of Vertex programs, it generally insists on full control of the discovery end of R&D. (See "Vertex Sells Productivity," IN VIVO, June 2000 Also see "Vertex Sells Productivity" - In Vivo, 1 June, 2000..)

The biotech's 2000 deal with Novartis AG covering the R&D of drugs against kinase targets extended that control into...

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