Vernalis plc announces that it has entered into an exclusive collaboration, option and license agreement with GlaxoSmithKline (GSK) relating to a Vernalis research programme against an undisclosed oncology target. During the research phase Vernalis will continue to apply its expertise in Structure Based Drug Design (SBDD) technologies to progress novel development candidates against the target.

The deal is structured as a risk-sharing agreement, with Vernalis responsible for drug discovery activities and GSK for pre-clinical development. Upon IND filing, GSK will have the option to license all collaboration compounds and if this is exercised, will then be responsible for all future development and commercialisation activities.

Under the terms of the deal Vernalis will receive $6 million upon signing (including a $3 million equity subscription by GSK for 2,040,542 new ordinary shares in Vernalis at a subscription price of 87 pence per share) and is eligible to earn up-front and potential milestone payments in excess of $200 million and up to double digit royalties based on worldwide sales of an oncology product. Further milestones and royalties could be earned should products against the target be developed for indications outside of oncology.

"Earlier this year we set ourselves the goal of securing research collaborations to fund a substantial proportion of our research activities. In May we announced a second collaboration with Servier and today we are delighted to announce this licensing agreement with GSK," said Ian Garland, chief executive officer. "The risk sharing structure of today's deal allows us to achieve our research funding goal but to also retain a significant upside from successful development of this novel Vernalis oncology programme. We are delighted to be working alongside GSK and to have another world leading pharmaceutical company endorse our technology and the quality of our work."

Vernalis is a development stage pharmaceutical company with significant expertise both in de novo fragment and structure-based drug discovery and pre-clinical and clinical development.