Orchid, Merck in drug research pact

Written by Corporate Bureau | Chennai, Sept 29 | Updated: Sep 30 2008, 08:09am hrs
Orchid Chemicals & Pharmaceuticals Ltd, on Monday, said that the company has entered into a strategic research collaboration and licensing agreement with global pharma major Merck & Co, Inc focused on the discovery, development and commercialisation of novel agents for the treatment of bacterial and fungal infections. The agreement is based on attractive financial terms including upfront payment, milestone payments and royalties on sale.

Orchid Research Laboratories Ltd (ORLL), a wholly-owned drug discovery arm of Orchid, and Merck will work to identify and develop novel antibacterial and anti-fungal compounds as clinically validated drug candidates. While Orchid will undertake the discovery and candidate development through Phase II human clinical trials, Merck will conduct last-stage clinical development and commercialisation subject to necessary approvals, said C B Rao, joint managing director, Orchid.

"Under the terms of the agreement, Orchid will be paid an undisclosed upfront sum and is eligible to receive payments totalling more than $100 million associated with the achievement of various development milestones," Rao said. "It takes anywhere between a minimum of 18 months to a maximum of 40 months to come out with compounds and Orchid is scheduled to get the payment in phases based on the milestones achieved," he added.

The agreement contemplates Merck and Orchid to work on multiple targets and compounds which will be evaluated against specific criteria for discovery and development. Orchid is also eligible to receive significant royalties on worldwide net sales of any product developed and commericalised under the agreement, said K Raghavendra Rao, managing director, Orchid.

He said: "Orchid is fully equipped with necessary infrastructure for discovery and development of new drug candidates and Merck has chosen to collaborate with us to leverage our anti-infective discovery, development and manufacturing capabilities to meet the global healthcare needs." While Orchid will hold the patents on the discovered drugs, the licensing for commercialisation would be left with Merck, he added.

Merck's know-how of target identification will be utilised to develop novel anti-bacterial and anti-fungal agents which will represent significant advancements over current therapies in anti-infective field. Orchid's current discovery programmes in the anti-infective domain would continue in parallel, with Merck taking an interest in such programmes based on the results and additional terms to be negotiated, Rao said.

Meanwhile, Raghavendra Rao said the promoters stake in the company again is back to the original 23% as they recently converted their warrants into equity. It came down from 24% to 17% as institutions downloaded the pledged shares in the open market, which led Solrex Pharmaceuticals, the investment arm of Ranbaxy, to accumulate its holding in Orchid to 14.79%. Currently, Solrex holds close to 13.3% in Orchid.