* Rigel to receive $100 mln upfront payment from AstraZeneca
* Up to $1.145 bln in milestones plus double-digit royalties
* AstraZeneca aims to file new drug for approval in 2013
* R788 a potential rival to Pfizer oral arthritis medicine
* Rigel shares down 5 pct, AstraZeneca off 0.5 pct
(Adds Rigel COO comment, latest share moves)
By Ben Hirschler and Vidya L Nathan
LONDON/BANGALORE, Feb 16 AstraZeneca Plc (AZN.L)
waded into the competitive rheumatoid arthritis market on
Tuesday by buying rights to Rigel Pharmaceuticals Inc's (RIGL.O)
next-generation drug R788 for up to $1.245 billion.
The deal is a big vote of confidence in the Rigel product,
known chemically as fostamatinib disodium, which failed one
mid-stage Phase II study last July.
Despite that setback, AstraZeneca and Rigel believe it can
still win through in final-stage Phase III tests, as an oral
alternative to injections of anti-TNF medicines.
An AstraZeneca spokesman said there was evidence results in
the failed trial were due to technical issues with study design
and interpretation. Two other Phase II studies were successful.
R788 is the furthest developed in a new class of drugs
called oral spleen tyrosine kinase inhibitors being evaluated
for rheumatoid arthritis.
Pfizer Inc (PFE.N) is developing a rival oral rheumatoid
arthritis pill, CP-690,550, that works through a different
mechanism of action. R788 is further behind but it has a quick
onset of action and Rigel believes it may have a competitive
advantage in terms of bone protection.
Shares in the small biotech company, however, fell 5 percent
Tuesday. Rigel shares have risen about 30 percent since it said
in November it was moving ahead with late-stage R788 studies.
"There is a lot of people who sell on the news and I imagine
that is what is happening. People are looking for fast money,"
Rigel's Chief Operating Officer Raul Rodriguez told Reuters.
NEED FOR DEALS
The large licensing deal is another example of a drive to
"externalise" research at AstraZeneca, which is cutting in-house
work as it deals with a wave of patent losses on top medicines.
Mike Ward, an analyst at Ambrian Partners, said AstraZeneca
was paying "top dollar" for the arthritis drug prospect.
"The size of the payments are perhaps indicative not only of
the compound's potential but also of AstraZeneca's need to boost
its late stage pipeline in the face of forthcoming patent
expiries," he said.
Under the agreement, AstraZeneca will make an upfront
payment of $100 million to Rigel, with up to $345 million more
payable after achieving regulatory and first sale milestones,
the two companies said in a statement.
The south San Francisco, California-based company will
recognise the upfront payment and about $25 million in milestone
payment in the calendar year 2010.
Rigel will also be eligible to receive up to an additional
$800 million and double-digit royalties on specific
AstraZeneca will design a Phase III programme, anticipated
to begin in the second half of 2010, with the goal of filing a
new drug application in 2013.
The London-based firm is responsible for all development,
manufacturing and global commercialisation activities.
Rigel believes its drug has multi-billion dollar sales
potential as an alternative to injections of blockbuster
anti-TNF drugs like Amgen Inc's (AMGN.O) Enbrel, Johnson &
Johnson's (JNJ.N) Remicade and Abbott Laboratories' (ABT.N)
Humira. These drugs work by blocking an inflammatory protein
known as a tumour necrosis factor, or TNF.
R788 is designed to help patients who do not respond to the
older drug methotrexate, which is the current standard of care
for rheumatoid arthritis patients.
For AstraZeneca, buying rights to R788 marks a significant
step up in its investment in arthritis, although it is not its
first foray in the field.
Its biotech division, MedImmune, has a monoclonal antibody
in Phase I trials and AstraZeneca is also seeking approval for a
new painkiller, Vimovo, to treat the symptoms of both rheumatoid
AstraZeneca shares ended 0.5 percent lower in a flat
European drugs sector .SXDP.
(Additional reporting by Archana Shankar in Bangalore; Editing
by David Cowell)