Tarveda Therapeutics agreed to discover, develop, and commercialize new cancer treatments based on Madrigal Pharmaceuticals’ HSP90 Drug Conjugate oncology platform—including its lead clinical candidate PEN-866, set to start clinical trials next year.

The exclusive worldwide licensing agreement could generate up to $249 million for Madrigal, the companies said.

The collaboration is designed to develop HSP90 drug conjugates, which are designed to increase cancer cell killing while reducing collateral damage to normal cells, thus overcoming challenges linked to current chemotherapies and other payloads.

HSP90 drug conjugates are small-molecule conjugates consisting of an HSP90 targeting molecule joined to an anticancer payload via a linker that enables controlled release of the payload inside cancer cells. Madrigal acquired the HSP90 drug conjugate platform through its merger with Synta Pharmaceuticals, completed in July.

PEN-866 is a small-molecule drug conjugate consisting of an HSP90 ligand conjugated to SN-38, the highly potent, active metabolite of the chemotherapeutic agent irinotecan. Once bound to its target, PEN-866 delivers the tumor-killing SN-38 payload. According to Madrigal and Tarveda, PEN-866 has shown “an impressive degree” of efficacy and durability of response in multiple preclinical tumor models, including patient-derived xenograft models.

Tarveda agreed to pay Madrigal an upfront payment and is eligible to receive up to $163 million in payments tied to achieving development, regulatory, and sales milestones related to the first HSP90 drug conjugate product developed under the agreement. Madrigal is also eligible to receive a tiered, single-digit royalty based on future worldwide sales of HSP90 drug conjugate products.

The agreement also calls for development, regulatory, and sales milestone payments tied to a second HSP90 drug conjugate product—payments that would be lower than those for PEN-866. Tarveda agreed to oversee all of the development costs for the HSP90 drug conjugate program, the companies said.

“This transaction is a key element of Madrigal’s strategy to out-license our novel oncology assets to organizations with the oncology focus and resources to fully exploit the opportunity for product development and commercial success,” Paul A. Friedman, M.D., Madrigal’s chairman and CEO, said in a statement.

Madrigal focuses on developing treatments for cardiovascular, metabolic, and liver diseases, while Tarveda specializes in developing miniaturized drug conjugates called Pentarins™ that are designed to target, penetrate, and eradicate solid tumors.

In addition to PEN-866, Tarveda’s pipeline includes PEN-221, a Pentarin conjugate set to enter Phase I trials this year to treat patients with neuroendocrine and small-cell lung cancer tumors, the company’s president and CEO Drew Fromkin added.

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