- GlaxoSmithKline said Friday it will pay at least $700 million for rights to two experimental drugs for neurodegenerative diseases, a deal that could be seen as momentous for the U.K. pharmaceutical giant, which hasn't significantly invested in brain drugs in more than a decade.
- The deal with Alector, a California-based company focused on using the immune system to fight neurodegeneration, revolves around a protein that regulates a variety of essential functions in the central nervous system, including cell growth, repair and inflammation. GSK now has access to two Alector drugs meant to boost this protein — with one being tested against an unusual type of dementia, and the other for more common diseases such as Parkinson's and Alzheimer's.
- In addition to the initial payment, GSK is offering Alector another $1.5 billion, provided certain development, regulatory and commercial milestones are met. Deal terms hold that Alector is in charge of getting its drugs through the middle stages of human testing, after which both companies will share development responsibilities and costs. The pair have also agreed to jointly sell the drugs in the U.S. and split profits and losses.
Brain drugs used to be of high interest to most major pharmaceutical companies. In the 1990s, GSK, Pfizer and Eli Lilly were at the forefront developing a new, lucrative class of antidepressants. And by the early 2000s, AstraZeneca and Bristol Myers Squibb had built multibillion-dollar businesses around antipsychotic medications.
But keeping that momentum proved challenging. Historically, neuroscience has been one of the most difficult areas of drug development, due in large part to the complicated biology of the brain. As clinical trial failures began to stack up, many companies abandoned or pulled back from the field, including GSK.
The newly inked deal with Alector, though, suggests GSK could be mounting a return.
The two drugs included in the deal both target a protein known as progranulin, which normally helps control immune system activity in the brain. When the gene that codes for this protein mutates, however, research indicates that it can cause neurodegenerative disorders like frontotemporal dementia.
Hal Barron, GSK's head of research and development, noted in a statement how his company's work in immunology and human genetics should be an asset to Alector as it continues testing the two drugs, which are respectively called AL001 and AL101.
The deal also comes at a notable time for neuroscience drug development.
Last month, the Food and Drug Administration controversially approved a first-of-its-kind treatment for Alzheimer's, despite unclear evidence that the medicine works. Critics have said the decision to clear Biogen's Aduhelm lowers the bar for what constitutes an approvable drug, and could spur more companies to submit medicines that don't have the typical level of supporting data.
In the weeks since, Bristol Myers Squibb said it would rejoin the hunt for Alzheimer's drugs through an $80 million deal with Prothena, a biotechnology company whose research focuses on dysfunctional proteins. The same day as that deal, Eli Lilly announced plans to seek a speedy approval for an experimental Alzheimer's medicine that works in a similar way to Aduhelm.
For Alector, the GSK deal offers the backing of another large pharmaceutical partner. (Two of the company's other experimental drugs are already licensed to AbbVie.)
Additionally, it provides a cash infusion that could make it easier for the company to run more studies of its drugs. AL001 is already in late-stage testing as a treatment for frontotemporal dementia, and a mid-stage trial in amyotrophic lateral sclerosis is set to begin in the second half of this year.
AL101, meanwhile, is designed to treat more common neurodegenerative illnesses, but just entered human testing at the end of 2019.
"This allows us to expand into indications that we have been quite thoughtful about doing, but in a more expeditious manner," said Shehnaaz Suliman, Alector's president and chief operating officer.
Suliman added that, while the ALS study is about to start, there are so-called proof-of-concept studies in Alzheimer's and Parkinson's that still need to get underway. "The broader indications, in particular, are likely to benefit from acceleration," she said.
Alector's stock is also benefiting from the deal and the confidence GSK appears to have in the drug programs. The company's share price soared nearly 80% Friday morning, to trade at almost $40 apiece.
Conversely, GSK shares stayed put. Over the last few years, under the leadership of Barron and CEO Emma Walmsley, the company has been trying to overhaul its operations and research, largely by targeting profitable areas of drug development like immunology and cancer.
Still, some remain frustrated with GSK's performance. Most notable is Elliott Advisors, an activist investor that's been critical of company management and strategy. On Thursday, Elliott issued a letter calling for changes to be made to GSK's board of directors before a planned split off the company's consumer health unit.
"Years of historical mis-execution will not be remedied easily, yet despite the currently weak sentiment, we believe that GSK has the ability to restore the market's trust in the critical year ahead," the firm wrote.
GSK responded to the letter Friday, arguing it believes it's on the right path and emphasizing its faith in Walmsley as CEO. The company last week unveiled an ambitious 10-year plan for what it's calling the "New GSK," a vision that features big bets on experimental drugs for infectious disease, cancer and immune conditions.