On the heels of landing the biggest venture capital investment of the year in North Carolina, Scynexis has signed a research agreement with drug giant Merck that takes the two-year-old pharmaceutical services company a step closer to developing its own drugs.

Scynexis and Merck plan to collaborate on the discovery and development of drugs to battle infections caused by organisms like bacteria, fungi and parasites. Financial terms weren’t disclosed, although Scynexis will receive milestone payments as products are developed and royalties on future sales in return for granting Merck exclusive worldwide rights to all drugs that result from their joint research.

Since a group of animal health researchers bought a technology platform from Aventis two years ago to create Scynexis, the company has worked with numerous large pharmaceutical companies, including Merck, on various projects. But Terry Marquardt, who heads up the company’s business development efforts, says this agreement has the biggest potential – both in terms of revenue and for Scynexis’ future.

“This is different than the vendor type of relationship we usually see,” Marquardt says. “We are contributing toward the research with work we will not be compensated for. It’s a true collaboration; we’re contributing the chemistry and they’re contributing the biology side.”

Scynexis usually provides third-party chemical analysis and other services to pharmaceutical companies, but officials are looking into the possibility of developing their own drugs as the company continues to grow.

High-speed analysis key

Marquardt would characterize the revenue potential of the deal only as “significant,” adding that the total is “a function of many variables,” including the number and range of drugs developed and their sales volume. He says the deal doesn’t include any upfront payments or any equity consideration.

Scynexis a week ago sold a chunk of equity for $29 million to a group of U.S. and European investors. It was the company’s third round of private capital and is by far the largest venture deal in North Carolina so far this year.

Using its proprietary Medchem-Factory technology and Hit Explorer Operating System, the company can speed the process of synthesizing and analyzing chemical compounds, which can then be screened to determine if the need further examination as potential drug candidates.

In the Merck deal, the Whitehouse Station, N.J.-based pharmaceutical company will provide screening targets for Scynexis to produce high-purity compound libraries and develop leads that Merck can examine further in pre-clinical studies.

Merck spokeswoman Janet Skidmore says the company has been impressed with Scynexis through earlier projects and thinks its analytical technology will be useful in discovering new drugs.

“We have enormous opportunity and ability to screen (chemical compounds), but their technology is a real asset,” Skidmore says. “We’re always looking for opportunities to bring in technology we think will be helpful.”

Keeping pipeline filled

Merck has been active in anti-infective drugs for many years, she says, noting the company has introduced two such drugs in recent months: Invanz, an antibiotic delivered by injection, and Cancidas to fight yeast infections.

Marquardt says Merck has “a pretty active franchise” in the field and that Scynexis officials hope the can contribute to maintaining a robust pipeline.

“A research project with a top-tier firm like Merck doesn’t come along every day, so we’re very excited about the possibilities,” he says.

Scynexis website: www.scynexis.com