Danish biotechnology firm Zealand Pharma has agreed to buy all outstanding shares and intellectual property of Canada-based Encycle Therapeutics.

Encycle Therapeutics provides technology to synthesise macrocyclic peptides with drug-like properties. It pipeline comprises a pre-clinical asset, ET3764.

ET3764 is an oral, peptide drug designed to target integrin alpha-4-beta-7 associated with the pathogenesis of inflammatory bowel disease (IBD).

The mode of action of the target has been validated in IBD by vedolizumab, an alpha-4-beta-7 integrin inhibitor.

The terms of the agreement cover all rights to develop and commercialise ET3764. However, the deal does not include any infrastructure or personnel costs.

Zealand expects the acquisition to boost its presence in peptide therapeutics and gastrointestinal diseases fields. It also gains access to Encycle’s screening library of nearly 5,000 peptide macrocycles with potential across various therapeutic areas.

The company could use its peptide development expertise to identify additional targets in the screening library.

Zealand Pharma president and CEO Emmanuel Dulac said: “Encycle has demonstrated the significant potential of its innovative peptide chemistry, and have remained focused on benefitting patients by creating orally-delivered therapies. We look forward to continuing progress by leveraging Zealand’s established leadership in peptide drug development.”

Under the agreement, Zealand will potentially pay $80m in one-time contingent value rights, including $10m in earn-outs at the successful completion of Phase II clinical trial.

All earn-outs may be paid in cash or Zealand equity, related to ET3764 and based on select development, regulatory and commercial milestones in the future.

Encycle is also eligible for royalties on net sales of the asset.

Encycle Therapeutics president and CEO Dr Jeffrey Coull said: “Encycle has been working on proprietary peptide macrocycles for several years, and our research shows that they have enormous potential to target protein-protein interactions, which are largely intractable to small molecule and biologic modulation.

“We are pleased to transfer our technology into the successful development capabilities of Zealand Pharma, to realise its full therapeutic potential.”