West Coast Editor

Oscient Pharmaceuticals Inc. is gaining a piece of the fenofibrate market with its buyout of U.S. rights to the once-daily, cholesterol-lowering drug Antara from Reliant Pharmaceuticals Inc. for $78 million.

Oscient, which also is buying about $4 million of existing inventory, entered a deal with Paul Capital Partners' Paul Royalty Fund II LP for $70 million of financing, including $40 million in a revenue interest that lets Paul Royalty get royalties on the net sales of Antara and Oscient's drug Factive, plus $20 million in debt due in 2010 and a $10 million equity investment by Paul Royalty in Oscient at 90 cents per share.

"We were looking for flexibility, in terms of our capital structure," said Steven Rauscher, president and CEO of Waltham, Mass.-based Oscient. "We did not want to try to finance this with a huge amount of equity."

It's the first time Paul Royalty, which also gets a warrant to buy 2.3 million shares of Oscient common stock at about 86 cents each, has structured a deal that involves all three vehicles: revenue interest, equity and debt. Greg Brown, partner with Paul Capital, said the deal took about a month, from handshake to signing.

"We knew Oscient very well," Brown said. "We have evaluated a number of opportunities with them," and this one fit Oscient's needs while not carrying so much risk that investors would be scared off.

"We've disaggregated the risk, but still given the company cash flow," he said.

Oscient's stock (NASDAQ:OSCI) closed Tuesday at 76 cents, up 11 cents, or 16.9 percent.

Antara, indicated as an adjunct treatment for hypercholesterolemia (high blood cholesterol) and hypertriglyceridemia (high triglycerides) in combination with diet, has proven effective in knocking down triglycerides and boosting high density lipoprotein cholesterol. In November, the FDA approved Liberty Corner, N.J.-based Reliant's supplemental new drug application for Antara's new dosing regimen, which lets patients take Antara 130 mg with or without food.

"This product is larger than the current lead product we're selling, Factive," Rauscher said. "It will more than double our revenues. We're a different company upon the closing of this transaction," which is expected to take place in the latter part of next month, he added.

Antara, which has garnered about $35 million in revenue for Reliant over the past 12 months, will be marketed by Oscient's sales force along with Factive (gemifloxacin mesylate) tablets. Factive is approved for acute bacterial exacerbations of chronic bronchitis and community-acquired pneumonia of mild to moderate severity. Oscient is developing an intravenous form of Factive for use in hospitalized patients. Testim, a testosterone gel from Malvern, Pa.-based Auxilium Pharmaceuticals Inc., also is promoted by the Oscient sales force to primary care physicians.

Antara competes in a market that grew 20 percent last year to about $1 billion and is led by Abbott Park, Ill.-based Abbott Laboratories Inc., whose blockbuster fenofibrate Tricor sold $251 million in the second quarter, a 14 percent jump over the same period last year. Tricor holds about 95 percent of the fenofibrate market, and this month, Abbott disclosed a collaboration with AstraZeneca plc, of London, to develop a single-pill, fixed-dose combination therapy of either TriCor or its next-generation version (known as ABT-335, now in Phase III trials) with Crestor (rosuvastatin), AstraZeneca's anti-cholesterol pill.

Statins still are the treatment of choice for high lipids, with New York-based Pfizer Inc.'s Lipitor (atorvastatin calcium), which is the world's most prescribed agent for reducing low density lipoprotein, the "bad cholesterol" - and since most physicians already have the patient on a statin when a drug such as TriCor or Antara would be added, the combo pill probably would not pose a huge threat.

Also, since higher-dose Crestor often is prescribed for patients with LDL in the upper reaches, the combo pill might not suit the majority. Lipitor, the leader in statins, goes out mostly as prescriptions for lower doses.

Rauscher compared the evolving lipids and cholesterol market to the market for hypertension. Most high blood-pressure patients are not treated with a fixed-dose combination, he pointed out.

"When patients are on multiple drugs, the doctor titrates those drugs individually," so that he can fit therapy to individuals, and can use the compounds with which he is most comfortable, he said, predicting combo treatment in one pill "will become a feature of the marketplace," but not a danger to Oscient.

"Fenofibrates and statins will continue to be used, often together, and there may be some subset of patients [better suited] for fixed dose," Rauscher said. "We don't have any immediate plans in that area."

Though statins are driving awareness of lipid trouble, they don't attack triglycerides especially well - and that's where fenofibrate comes in.

The compound works by activating the peroxisome proliferator activated receptor (PPAR) A, which revs lipolysis and elimination of triglyceride-rich particles from the blood. Solvay SA, of Brussels, Belgium, also made fenofibrate news this month, when it submitted Synordia to European regulators. Synordia combines fenofibrate with metformin (Glucophage, Bristol-Myers Squibb Co.). If approved it would be the first product on the market that puts a lipid lowering drug with an anti-diabetic compound in a single pill, targeting increased patient convenience and improved compliance for patients already stabilized on the two medications.

Solvay got fenofibrate through its 2005 buyout of Paris-based Fournier Pharma, which is Abbott's partner in the U.S.

Rauscher said the fenofibrate market is expected to double by 2010, and his firm will do its part in the expansion, but "there are larger forces than Oscient Pharmaceuticals here. The manufacturers of the statins are investing a lot of money to educate physicians and the public to test and treat abnormal lipids," particularly in patients with the usual risk factors: hypertension, Type II diabetes, obesity and family history of disease.

Paul Royalty's Brown acknowledged the statin coattail effect. He said his firm has done hybrid (though not three-part) deals before, such as those with Pharming NV, of Leiden, the Netherlands, and San Diego-based Verus Pharmaceuticals Inc. - and will continue to try tailoring deals to companies the way doctors tailor drugs to patients. (See BioWorld Today, June 10, 2005, and Feb. 6, 2006.)

"We've done 29 investments, and no two are alike," Brown said.