The Hindu Business Line : Merck deal: Positive for Nicholas Piramal

Nicholas Piramal’s agreement for a research and development collaboration in discovering and developing new oncology drugs for two selected targets provided by Merck, is a long-term positive for the former. With potential revenues in excess of $350 million, in the form of milestone payments and royalties on ensuing sales, the deal provides third-party validation of the company’s research and development (R&D) capabilities. This assumes significance with Nicholas Piramal hiving off its new drug research outfit, Nicholas Piramal Research Company (NPRC) and deciding to list the latter separately by June-July 2008.

While it is difficult to ascertain the period from when the deal might be expected to contribute to earnings, the milestone payments are primarily linked to Phase II and registration stages.

The registration stage is vital as a lot of molecules are discarded at this stage because they are unable to display cost-effectiveness, essential in drug discovery business. Importantly, the current deal is not an out-licensing arrangement on the lines we have seen by other pharma companies recently, where the innovator gives the prospective molecule to a deep-pocketed pharma major who then takes financial responsibility for the same.

Here, NPRC will undertake early drug discovery involving several phases from target identification to preclinical development.

Since Merck has already selected targets, the process of development in the later stages, may be expedited. Given Nicholas Piramal’s strength in the oncology (cancer) segment with NPRC’s own lead molecule P-276 doing well in clinical trials (it also has four other molecules in its oncology pipeline), the Merck deal will augur well for the company.

To realise the full potential of the deal though, shareholders of Nicholas Piramal and subsequently NPRC might have to wait for up to 10 years. Nicholas Piramal will carry out the drug discovery programme up to human clinical trials, a time-consuming affair, while Merck has the option to advance the drug candidates to late stage clinical trials and commercialise them.

More Stories on : Stocks | Research & Development | Pharmaceuticals

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page