Assistant Managing Editor

Just three months ahead of the FDA's action date for Intermezzo, Transcept Pharmaceuticals Inc. secured a potential $145 million partnership with Purdue Pharmaceutical Products LP, a deal that pads the firm's already solid cash balance and sets the stage for Transcept to build its own specialty sales force.

The deal was a hit on Wall Street, which sent shares of Transcept (NASDAQ:TSPT) jumping 41.7 percent, or $2.42, to close Monday at $8.22, and might relieve the concern of some investors who worry about the actual market potential of Intermezzo.

A sublingual version of zolpidem - at about a third of the dose administered with Paris-based Sanofi-Aventis Group's blockbuster sleep aid Ambien CR - Intermezzo is designed to work rapidly and be short-acting, so that patients who awaken in the middle of the night can return to sleep quickly and awaken easily in about four hours. Most existing insomnia drugs are required to be taken at bedtime, when a patient can get seven or eight hours of sleep, said Glenn Oclassen, president and CEO of Transcept.

Intermezzo's data have been solid. The drug met its primary endpoints in three Phase III studies, showing that patients were able to return to sleep quickly, with no residual effects the next morning. But some have remained skeptical of the product's overall ability to permeate a sleep market already dominated by the drugs like Ambien. Plus, there already are fast-acting versions of zolpidem from NovaDel Pharma Inc. (ZolpiMist) and Orexo AB (Edluar) on the market.

Oclassen, who said last year that Intermezzo could end up being a $600 million to $800 million opportunity, referred more current market projections to the firm's new partner, but added that "Purdue wouldn't have been interested" in Intermezzo if the sales potential wasn't significant.

The deal also might put to rest grumblings from its recent reverse merger with Novacea Inc. When initially announced last year, shareholders of South San Francisco-based Novacea - left without much of a pipeline following the Phase III implosion of prostate cancer drug Asentar - were leery of giving that the company's substantial cash to a small firm with an unpartnered development-stage product. (See BioWorld Today, Sept. 3, 2008.)

Since then, Transcept has been working to shore up investor confidence, Oclassen told BioWorld Today. He called the Purdue deal an "important step in that direction," hopefully to be followed by the issuance of key patents and FDA approval of Intermezzo later this year.

"We're bound and determined to make people feel good about saying 'yes' to that deal," he said.

In exchange for North American commercialization rights to Intermezzo, Stamford, Conn.-based Purdue paid Transcept $25 million up front. Another $30 million is due upon product approval, provided the product's label includes its use as an as-needed insomnia treatment for middle-of-the-night awakening.

Transcept can bank that $30 million as long as the product hits approval before around mid-2010, giving the firm a little breathing room in case it stumbles on a regulatory issue or the FDA misses the Oct. 30 PDUFA date. The agency previously extended the review period from July 30 after requesting additional information regarding middle-of-the-night dosing instructions.

Transcept also is eligible for up to $90 million in milestones related to intellectual property achievements and U.S. net sales targets, plus double-digit royalties ranging up to the mid-20s. But Oclassen highlighted the co-promotion option, which the Pt. Richmond, Calif.-based firm can exercise after the first year, as a key part of the partnership.

Primary care physicians are the main prescribers for sleep drugs - writing about 75 percent of prescriptions - and Transcept "had no interest in building the kind of sales force to serve an audience that large," Oclassen said.

But the firm would like to put together a small, specialty sales force to sell Intermezzo to a more manageable psychiatric market. That same sales force also could come in handy if the company expands its pipeline as planned.

If Transcept elects to co-promote Intermezzo, it stands to receive an additional double-digit royalty on the portion of U.S. net sales generated by psychiatrists. That means the "cost of the sales and marketing effort will already be underwritten by the royalties," Oclassen said.

Not that Transcept doesn't have substantial cash on its own. The firm ended the first quarter with about $81 million, most of that coming from its Novacea merger.

Beyond Intermezzo, the company has a "couple of projects in house that are in the exploratory phase," Oclassen said, and is looking for products, Phase II-stage and beyond, that might be available for in-licensing.

"There are a number of companies with very worthy projects who have been caught in these difficult financial times," he said. "We're lucky to be in the position to possibly adopt one or more of those potential orphans."

Published  August 4, 2009