Teva Pharmaceutical Industries Ltd. amended its agreement to license worldwide rights to Phase III diabetes drug DiaPep277 from Andromeda Biotech Ltd., a wholly-owned subsidiary of investment group Clal Biotechnology Industries Ltd.

Under the new terms of the deal, Jerusalem-based Teva will invest $50 million in Tel Aviv, Israel-based Andromeda. Teva will have 60 days following an interim analysis of the ongoing Phase III DiaPep277 trial to invest $17.5 million at a $90 million pre-money valuation.

Once the Phase III trial is completed, Teva will invest an additional $17.5 million at a $170 million pre-money valuation. Teva also will invest an additional $15 million at an undisclosed point in time.

Once DiaPep277 receives European marketing approval, Clal and other investors may sell Teva shares valued at $44 million at a $480 million valuation. Upon U.S. marketing approval, the investors may sell Teva shares valued at $52 million at a $555 million valuation.

Teva also will pay Andromeda royalties and will make additional payments if DiaPep277 is developed for other indications.

DiaPep277 is a peptide derived from heat-shock protein HSP60, which prevents the destruction of insulin-producing pancreatic cells in Type I diabetes. The compound is being studied in a Phase III trial in Europe, South Africa and Israel, and an interim analysis is expected to occur in the first half of 2008.

Andromeda licensed DiaPep277 earlier this year from Goettingen, Germany-based DeveloGen AG. Terms of that deal were not disclosed. Teva previously had been in discussions to acquire Andromeda but has since modified its approach to gaining access to the drug.

Shares of Teva (NASDAQ:TEVA) rose 45 cents to close at $45.08 on Monday. Shares of Clal (TASE:CBI) rose ILS14.7 to close at ILS777.70 (US$201.87).