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| Quartet CEO Kevin Pojasek |
Quartet Medicine, at work on first-in-class treatments for pain and inflammation, is partnering up with Merck ($MRK) to push its pipeline forward, signing a deal that could lead to a $575 million buyout agreement.
Under an agreement between the two companies, Merck will pay Quartet $10 million up front and $10 million more later this year for the right to buy into the company's early-stage treatments targeting BH4.
Short for tetrahydrobiopterin, BH4 is a chemical produced by the body after injury. Quartet, looking at years of genetic data, noticed that the roughly 2% of patients born with inherently low BH4 production tend to have fewer problems with chronic pain, and the company has since designed some small-molecule candidates designed to block the chemical and relieve pain and inflammation in the other 98% of the population.
With Merck's cash and expertise secured, Quartet believes it has what it needs to push its lead asset into clinical development in 2017 with hopes of starting a proof-of-concept Phase IIa study the following year. Per the partnership, Merck has the option to buy the company outright upon receiving those Phase IIa data, a move that would give Quartet an undisclosed exercise fee and up to $575 million more in cash tied to development, regulatory and sales milestones.
Quartet, co-founded by Atlas Venture in 2014, is a few months removed from closing its $23.3 million Series A financing, which drew investments from Atlas, Novartis ($NVS) Venture Funds, Partners Innovation Fund, Pfizer ($PFE) Venture Investments, Remeditex Ventures and a pair of unnamed Chinese backers.
The company had plenty of contact with potential partners over the past 18 months or so, CEO Kevin Pojasek said, but found in Merck a like-minded approach to R&D and a favorable deal structure. The Merck deal allows Quartet to draw on its partner's expertise as it moves toward the clinic while retaining autonomy in decisionmaking, he said, and Merck's $20 million short-term commitment gives the company what it needs to reach its next inflection point. On the back end, the potential for a $575 million buyout was enough to satisfy Quartet's existing investor syndicate, Pojasek said.
Quartet's novel approach to chronic pain comes amid a resurgence of interest in the field. Last year, Biogen ($BIIB) agreed to pay as much as $675 million for Convergence Pharmaceuticals, and Novartis bet up to $700 million on Spinifex, deals that reflect a sea change in Big Pharma's take on pain management R&D, Pojasek said.
"We're definitely thrilled to be doing what we're doing in a time where people are coming back to the pain space," he said. "Companies have always recognized the unmet need but have been fairly daunted by the challenge."
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