GlaxoSmithKline (NYSE:GSK) is strengthening its drug pipeline with an experimental arthritis treatment from drug partner ChemoCentryx.

The pharmaceutical giant has exercised an option for an exclusive license to develop ChemoCentryx’s investigational drug CCX354, which recently produced positive phase 2 clinical trial results in a study of patients with rheumatoid arthritis. Under terms of the collaboration agreement, GSK will pay California-base ChemoCentryx a $25 million fee to exercise the option, which gives the British pharmaceutical giant an exclusive license to develop the compound and commercialize it worldwide.

GSK, which has its U.S. headquarters in Research Triangle Park, now takes over paying for any additional costs for clinical studies and commercialization of the drug. ChemoCentryx is eligible for additional payments based on regulatory and sales milestones. If CCX354 is successfully commercialized, ChemoCentryx would receive double digit royalties on net sales.

GSK and ChemoCentryx entered into a collaboration in 2006 to discover and develop new treatments for a variety of inflammatory disorders. The deal gave ChemoCentryx a $63.5 million up front payment, a mix of cash and equity investment in the company. GSK also pledged research funding and milestone payments that could reach up to $1.5 billion.

ChemoCentryx focuses on discovering therapeutics that target the chemokine and chemoattractant systems. The chemokine system is a biological network that regulates inflammation by way of a collection of secreted chemokine molecules. ChemoCentryx develops drugs to treat autoimmune diseases, inflammatory disorders and cancer.

Rheumatoid arthritis affects an estimated two million people in the United States. While its exact cause is not known, the condition is believed to be part of the immune system’s attack on the tissue that lines joints. CCX354 works by selectively blocking a chemokine receptor involved in joint inflammation in arthritis patients. The selective action minimizes side effects.

The arthritis drug candidate is the second ChemoCentryx compound licensed by GSK from the partnership. A year ago, GSK licensed ChemoCentryx’s CCX282-B, a compound indicated for treating inflammatory bowel disease. That compound is now called GSK’786.

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