Zealand Pharma expands peptide platform with acquisition of Encycle Therapeutics

The acquisition is centered on a pre-clinical lead asset that complements Zealand’s focus on developing next-generation peptide therapeutics for gastrointestinal diseases. The lead asset, ET3764, is being developed as an orally-delivered peptide drug to target integrin alpha-4-beta-7, which is involved in the pathogenesis of inflammatory bowel disease (IBD). The target’s mode of action has been clinically validated in IBD by vedolizumab, an approved, infusion-only alpha-4-beta-7 integrin inhibitor.

“We are excited to add this emerging technology into Zealand Pharma’s peptide platform,” said Emmanuel Dulac, President and Chief Executive Officer at Zealand Pharma. “Encycle has demonstrated the significant potential of its innovative peptide chemistry, and have remained focused on benefitting patients by creating orally-delivered therapies. We look forward to continuing progress by leveraging Zealand’s established leadership in peptide drug development.”

Zealand will also gain access to Encycle’s screening library of approximately 5,000 unique peptide macrocycles that could provide additional targets for research using Zealand’s expertise in peptide development.

“Encycle has been working on proprietary peptide macrocycles for several years, and our research shows that they have enormous potential to target protein-protein interactions, which are largely intractable to small molecule and biologic modulation,” commented Dr. Jeffrey Coull, President and CEO at Encycle Therapeutics. “We are pleased to transfer our technology into the successful development capabilities of Zealand Pharma, to realize its full therapeutic potential.”

Under the terms of the agreement, Zealand will acquire all outstanding shares in Encycle Therapeutics Inc. and all its intellectual property, including all rights to develop and commercialize the lead asset. Zealand will not be acquiring any infrastructure or personnel costs with this transaction.

The total future consideration for the acquisition could potentially reach US $80 million in one-time contingent value rights (“earn-outs”), of which US $10 million in earn-outs could be payable up to the successful completion of a Phase 2 study. All earn-outs are payable in cash and/or Zealand equity at Zealand’s discretion, are linked to the lead asset only, and contingent on certain future successful development, regulatory, and commercial-related milestones. There is also a potential mid-single digit royalty on global net sales from the lead asset.

The acquisition does not affect Zealand’s financial guidance on net operating expenses of DKK 580-600 million for fiscal year 2019.

Source: Company Press Release