A validating HCV deal

WATERTOWN, Mass.—Enanta Pharmaceuticalsand Abbott announced in early December a worldwide agreement for the research,development and commercialization of hepatitis C virus (HCV) NS3 and NS3/4Aprotease inhibitors.

Under the terms of the deal, Enanta received an upfrontpayment of $57 million, a portion of which represents an equity investment byAbbott. Milestone payments have the potential to add as much as $250 millionmore to Enanta's coffers with additional payments due the company should morethan one product be developed as a result of the alliance.

"There were a lot of companies that were interested in [ourprogram]," says Jay R. Luly, Ph.D., president and CEO of Enanta. "But I thinkthere was a good fit between our approach, versus what Abbott was looking forto complement their HCV work."

According to Terry Opgenorth, divisional VP for antiviralresearch at Abbott, the company—already well-known for its history in antiviralwork and leading position in the treatment of HIV—was actively looking forother HCV avenues and approaches that would complement its program whichfocuses on polymerase.

"We are very interested in continuing being [active] inantivirals. Because of the unmet need in HCV, in particular, we are working inthat area while also looking for other opportunities," says Opgenorth. "Enantaemerged as a top candidate because of what we felt they have in terms ofproprietary chemistry—a breadth of chemistry in terms of numbers of leads andstructures available—the drug-like properties those leads appear to have andtheir potency and preclinical lead status. It's because of all those thingsthat we aggressively pursued a partnership with them."

For Enanta, founded in the late 1990s, the upfront paymentand investment in the company provides a measure of stability as it continues itswork in both antiviral and in bacterial infections, including MRSA.

"This deal is hugely important for Enanta," notes Luly. "Inthe immediate term, it represents a financing event that provides us with a fewyears of capital. But it is also attractive in terms of the mid-term potentialmilestones, future royalties and the option for a profit share in the U.Smarket."

That profit share, should Enanta exercise its option, couldgo as high as 40 percent should the company provide 40 percent of thedevelopment costs. Opgenorth notes that these kinds of options are becomingmore prevalent in the industry.

"In [today's] environment where the cost of development isincreasing at a rapid rate and the risks associated with those developmentcosts are also high, this is way a company like Abbott can mitigate its developmentexpense risk. It's also a way for a company like Enanta to share that risk togain additional reward – a higher profit return if the compound is successful."

And the potential rewards are huge. According to bothcompanies, the market today for HCV therapeutics—mostly interferon—is roughly$3 billion worldwide. But as companies like Abbott and others get closer tobringing new therapeutics to market, the market is expected surge to $12billion to $15 billion within seven or eight years.

One reason a quick rise is expected is due to the fact that,like HIV, "cocktails" of multiple therapies should prove to be most effectiveagainst the HCV.

For Enanta and Abbott, the market opportunity in the U.S.alone could be significant as estimates peg the total number of infected peopleat 3 million, or roughly one out of every 100 people. Worldwide estimates areequally staggering with as many as 170 million infected with HCV. u