US-based Elixir Pharmaceuticals has entered into an agreement with Novartis for an exclusive option to acquire Elixir’s Type 2 diabetes lead oral “ghrelin” antagonist drug.

The deal will go through following the successful completion of a Phase IIa clinical study of Elixir’s lead oral ghrelin antagonist, currently in pre-clinical, IND-enabling studies.

The deal with Novartis could exceed $500m, including the initial acquisition payment plus potential additional regulatory and sales milestone payments. The agreement also includes the right to an exclusive worldwide license under pre-agreed conditions.

Elixir president and CEO Paul Martha said that Type 2 diabetes continues to grow as one of the leading causes of excess morbidity and mortality around the world.

“New therapeutic options for this serious and chronic disease are sorely needed and we are extremely pleased to have reached agreement with Novartis on the tremendous potential value of our ghrelin antagonism programme,” Martha said.

Elixir also announced the completion of $12m of equity financing, led by MPM Capital on behalf of the MPM Bio IV NVS Strategic Fund LP.