Glaxo signs second Cellzome drug discovery deal

* Anglo-German biotech gets 33 mln euros upfront

* Milestone payments could reach over 475 mln euros

* Second deal between Cellzome and Glaxo in two years

LONDON, March 10 (Reuters) - GlaxoSmithKline (GSK.L) has strengthened its ties with Anglo-German biotech company Cellzome by signing a second drug discovery deal worth up to 508 million euros ($690 million).

Privately owned Cellzome said on Wednesday it would receive 33 million euros upfront and milestone payments could reach more than 475 million, if all programmes under the new inflammatory disease alliance are successfully developed and commercialised.

The latest agreement follows a deal between the two companies worth up to 840 million pounds ($1.3 billion) in 2008.

Researchers from Glaxo and Cellzome will work together under the latest deal to identify tablet treatments against targets from four different so-called epigenetic target classes, using Cellzome's technology.

Epigenetics is an emerging field of research related to changes in gene expression caused by mechanisms other than changes in DNA sequence. Scientists believe it offers a novel way to intervene to treat a range of diseases.

As with the original 2008 tie-up, the new research effort will focus on treatments for rheumatoid arthritis, lupus and other serious inflammatory diseases.

Glaxo will not reap rewards any time soon, since the potential new drug candidates are still three or four years away from reaching clinical development and it will be many more years before they can be submitted for regulatory approval.

Tim Edwards, Cellzome's chief executive, said the deal underpinned the business model of the small company, which employs researchers in Cambridge, England, and Heidelberg, Germany.

Edwards said an initial public offering was a possibility at some stage but the company would bide its time.

"We're in no rush to IPO," he told Reuters.

"One of the things that distinguishes Cellzome is that we haven't been back to our investors since December 2002. We're running a self-financing model, so we are not under pressure to go to the public market."

Cellzome's backers include Advent International, Atlas Venture, Astellas Venture Capital, Biofrontier Partners, Heidelberg Innovation, Index Ventures, Invesco Private Capital, SV Life Sciences, SG Asset Management and Sofinnova Partners. (Reporting by Ben Hirschler; Editing by Louise Heavens)