In an effort to focus on its preclinical targeted therapeutics, SuperGen Inc. decided to sell the North American rights to Nipent and SurfaceSafe to Mayne Pharma Ltd. in a deal worth $34 million.

Nipent (pentostatin for injection) is the company's marketed treatment for hairy-cell leukemia, while SurfaceSafe is a towlette system for decontaminating surfaces on which chemotherapy is mixed or administered.

For the products, Melbourne, Australia-based Mayne is paying $14 million up-front and up to $20 million more based on product performance.

SuperGen's original strategy when it bought Nipent from Warner-Lambert Co., of Morris Plains, N.J., in 1996, was to create a sales and marketing organization for which it could incorporate two more therapeutic products, presumably Orathecin (rubitecan) and Dacogen (decitabine).

But things did not work out as planned. First, in summer 2004, after a competing product was approved, SuperGen partnered worldwide marketing rights to Dacogen for myelodysplastic syndromes with Minneapolis-based MGI Pharma Inc.

Then, in April, Orathecin in combination with gemcitabine as a first-line therapy in patients with advanced pancreatic cancer showed an estimated median survival of six months in a Phase II study, failing to meet the threshold for advancing to a Phase III study. The data followed the company's decision in January 2005 to withdraw its new drug application for Orathecin after the FDA suggested the filing would not support approval, and its withdrawal in January of a marketing authorization application in the European Union.

Dublin, Calif.-based SuperGen searched for other products to in-license but could not find anything that was "economically viable," said James Manuso, the company's president and CEO.

"We were unable to deliver additional drugs to our sales force," he said, "and the traditional strategy could not be realized as originally envisioned."

Although analyst Matthew Osborne, of New York-based Lazard Capital Markets LLC, applauds SuperGen's decision to divest non-core assets, he downgraded the company's stock to "sell" from "hold."

Without its marketed products, he said, SuperGen has little but a royalty stream for the recently approved Dacogen and a preclinical pipeline.

"That's the difficulty I have with the valuation at this point and the company's decision," Osborne told BioWorld Today. "I understand divesting those assets and moving in a direction that provides them with a proprietary pipeline, but that pipeline is yet unproven, so what you're left with is this value of a franchise that is yet unknown."

SuperGen's targeted therapeutics include a number of preclinical products that are inhibitors of aurora-A, tyrosine kinase and DNA methyltransferase. The company acquired the technology through its acquisition of Montigen Pharmaceuticals Inc., of Salt Lake City, for $18 million in cash and shares, plus $22 million in additional regulatory milestone payments. Announced in January, the buyout was completed in April. (See BioWorld Today, Jan. 30, 2006.)

"We expect to be in the clinic with our lead compound in less than a year," Manuso said, indicating the most advanced product, MP-470, has shown promise in solid tumors.

The company is negotiating further with Mayne Pharma to divest U.S. rights to mitomycin, an approved cytotoxic cancer therapeutic, and to sell the ex-U.S. rights of Nipent.

Nipent earned SuperGen about $15 million last year, 92 percent of its 2005 revenues. Mitomycin brought in almost $1 million in revenues, while SurfaceSafe - a product intended as a "giveaway to get in the door" of oncologists' offices, Manuso said - made about $100,000. SuperGen has a sales force of about 34 people in the U.S.

"The cost to maintain that $15 million or $16 million in sales via the sales force wasn't worth it to them in the end," Osborne said, adding that the company is reducing their sales and marketing headcount and will have no commercial infrastructure.

"They're basically turning into an early stage cancer company," he said, "and there's a lot of those out there."

Osborne hopes the company will retain Orathecin, but SuperGen has indicated that it will either divest or partner that product, as well. Manuso said the company's intention is to use the product, as well as Dacogen, as a "financial engine" for funding its next-generation targeted therapeutics.

Other companies with promising early stage therapeutics have to "go back to the market; they've got to raise money; they've got to sell them," Manuso said. "We will not have to do that. We've got a self-financed discovery operation."

Dacogen received clearance in myelodysplastic syndromes in May, about two years after Boulder, Colo.-based Pharmion Corp. received FDA approval for a competing product, Vidaza - an event that played into SuperGen's decision to license out Dacogen rights to MGI Pharma later that year. SuperGen is entitled to a $20 million milestone payment from MGI upon launch and is due 20 percent royalties on sales up to the first $50 million, rising by 2.5 percent for each additional $50 million and peaking at 30 percent. (See BioWorld Today, May 4, 2006.)

Those royalty payments to SuperGen could be about $5 million to $8 million this year, Osborne said. The company expects Dacogen sales to peak at $250 million in the U.S.

Mayne previously announced a strategy to acquire niche marketed or close-to-market products to strengthen its oncology portfolio and leverage its development, manufacturing and marketing capabilities. With the SuperGen transaction, the company gains all product rights, patents, registrations, trademarks, inventories and supplier and customer contracts for Nipent and SurfaceSafe in North America.

Mayne generated sales of more than $500 million in the fiscal year ended June 2005. It is listed on the Australian Stock Exchange under the symbol "MYP."

SuperGen's stock (NASDAQ:SUPG) fell 16 cents Thursday, to close at $3.47.

Osborne's firm, Lazard, expects SuperGen to end 2006 with about $50 million to $55 million in cash, or about $1 per share.