Staff Writer

Shares of Nastech Pharmaceutical Co. Inc. jumped 18 percent Wednesday on news of a potential $577 million deal with Procter & Gamble Pharmaceuticals Inc. to develop Nastech's nasal spray for osteoporosis.

The deal, coming on the heels of the first FDA approval for an inhaled insulin product, provides some much-need validation for drug delivery firms, which "sometimes are underappreciated" in the industry, said Steven Quay, president and CEO of Bothell, Wash.-based Nastech.

But the recent success of New York-based Pfizer Inc. and San Carlos, Calif.-based Nektar Therapeutics Inc. in winning approval for Exubera, a non-injected form of insulin, followed by Nastech's large-scale collaboration with P&G, "reminds Wall Street of the value premise that drug delivery companies provide," Quay told BioWorld Today.

Nastech agreed to grant exclusive, worldwide rights to its parathyroid hormone (PTH1-34) intranasal product to P&G to develop and commercialize the product in osteoporosis and other indications. In exchange, P&G agreed to pay up to $577 million over the life of the agreement, including an up-front fee of $10 million and up to $22 million in milestones during the first year. On top of that, Nastech stands to receive "escalating, double-digit royalties" upon approval, and the company also retains some co-promotion rights, Quay said.

The companies will jointly develop PTH1-34, with Cincinnati-based P&G picking up the costs. Nastech will be responsible for the chemistry, manufacturing and controls section of regulatory submissions

Nastech's stock (NASDAQ:NSTK) gained $2.89 Wednesday, to close at $18.79.

PTH1-34 is anticipated to begin a six-month Phase III trial this year, which will test the nasal spray against the injected form of PTH (available as Forteo, by Indianapolis-based Eli Lilly & Co.) in a non-inferiority study evaluating bone mineral density at a single skeletal site. Quay said the trial is expected to enroll about 300 to 400 women per treatment arm.

Because Lilly already has an approved injectable PTH, Nastech will be able to file a 505(b)(2) new drug application, which allows for a shorter and less expensive development path. Rather than having to demonstrate the effectiveness of PTH in a trial requiring "thousands of patients and years to prove those clinical endpoints," Quay said, "all we have to do is demonstrate six months of bone mineral density change."

About 10 million Americans suffer from osteoporosis, according to the National Osteoporosis Foundation. PTH-34 is a fragment of the naturally occurring human PTH determined to regulate calcium and phosphorus metabolism, and injectable forms of the hormone have been shown to increase bone mineral density and reduce both vertebral and non-vertebral fractures in postmenopausal women.

Unlike most osteoporosis drugs, which work to slow down the breakdown of bone, PTH actually stimulates bone growth. Nastech's nasal spray is intended to work the same as the PTH injection, but offer patients an easier method of administration.

"In studies we've done where people have had the choice between a nasal spray and an injection, they overwhelmingly pick the nasal spray," Quay said.

For P&G, which already markets an osteoporosis drug, Actenol (risedronate), a bisphosphonate that brings in about $1.7 billion in sales per year, the deal with Nastech was a "significantly strategic move" to secure access to both a PTH molecule and a bisphosphonate, Quay said.

"Late last year, an article was published in the New England Journal of Medicine showing that combined sequential therapy of PTH and bisphosphonate actually, for the first time, caused a net bone growth, as opposed to just stopping resorption," he said. "Some of the experts are actually talking about curing osteoporosis with that combination."

Development of PTH1-34 in combination with Actenol is included in the overall collaboration.

In the meantime, Nastech is awaiting word from the FDA on its Calcitonin nasal spray, which also is intended to treat osteoporosis in postmenopausal women, but would be used mainly for women with mild forms of the disease. Filings for that product were completed as an abbreviated NDA.

The company continues to work on its peptide YY (PYY) product in obesity, as part of a $346 million deal signed with Whitehouse Station, N.J.-base Merck & Co. Inc. in 2004. PYY is a naturally occurring hormone produced by specialized endocrine cells in the gut in proportion to the calorie content of a meal, and research has shown that PYY could be successful in regulating appetite control. (See BioWorld Today, Sept. 28, 2004.)

Nastech has an intranasal insulin product in late preclinical development, and had been waiting to evaluate the "hurdle level" in the FDA's approval of the inhaled insulin product, Exubera, Quay said, adding, "We're hoping now to get our intranasal formulation into the clinic this year."