Staff Writer

Phenomix Corp. and Forest Laboratories Inc. entered a deal to develop and commercialize oral diabetes drug candidate dutogliptin (PHX1149) in North America.

Under the agreement, Forest will make an up-front payment to Phenomix of $75 million, and milestone payments could push the total deal up to $340 million over the term of the collaboration.

The two companies agreed to a 50-50 split of the development costs and profits for dutogliptin in the U.S. But in the event that Phenomix is unable to match its share of the costs, the company still could be permitted to hold substantial ownership under the deal, CEO Laura Shawver told BioWorld Today.

She estimated that the up-front payment could take the program "far into Phase III."

Phenomix has raised about $141 million in private equity since its inception. The company had filed for an $86 million initial public offering to push through its lead candidate, dutogliptin, but withdrew it and secured financing by partnering the product. (See BioWorld Today, Jan. 29, 2008.)

A primary reason why New York-based Forest Labs was seen as a good fit for Phenomix was its access to primary care physicians. The parties will co-promote the product in the U.S., with Phenomix promoting dutogliptin to endocrinologists and diabetes specialists, while Forest handles primary care and specialty markets.

Dutogliptin, a dipeptidyl-peptidase-4 (DPP-4) inhibitor, recently entered Phase III testing in Type II diabetes mellitus. Such studies can take several years to complete, and prior to the deal, San Diego-based Phenomix had estimated that Phase III dutogliptin data could come in 2011. However, now that the deal has been signed, the timelines could get reworked, according to the company.

Phenomix has not said at this stage how soon it could file a new drug application for dutogliptin.

Ian Sanderson, an analyst with Cowen and Co., wrote in a research note, that the "competitive hook" for dutogliptin remains unclear. He noted that the initial Phase IIb results for dutogliptin 200 mg and 400 mg, released last May, did not disclose absolute reductions in glycated hemoglobin A1c levels, an indicator of how well the blood glucose level is controlled.

By Sanderson's count, dutogliptin could be the fifth or sixth drug candidate to reach the market, and the road to approval could be "protracted," he said. Still, he added, it represents a solid deal for Forest, "and signals that good late-stage development candidates remain available."

Asked why he believed the regulatory development process could be a long haul, Sanderson said that the FDA has proposed cardiovascular outcome studies for diabetes drugs that have potential heart risk signals. It is not yet clear whether such studies would apply to dutogliptin, Sanderson said. Though, he said there is a possibility that the agency may seek such studies for the class.

Citing clinical consultants, Sanderson said the DPP-4 class of diabetes drugs may see a great deal more growth than the GLP-1 class. The safety profile is relatively clean; it has an A1c level reduction similar to the GLP-1 products; and it has the convenience of being administered orally.

But a potential drawback, he said, is that DPP-4 inhibitors are weight neutral, whereas the GLP-1 products have shown good weight reduction.

Basel, Switzerland-based Novartis AG's Galvus, a DPP-4 inhibitor approved in Europe, has shown toxicity associated with skin rash and "may never see the light of day" in the U.S. market, as the FDA has required additional trials, Sanderson said.

Next in line could be Osaka, Japan-based Takeda Pharmaceutical Co. Ltd.'s alogliptin, filed in January, followed by New York-based Bristol-Myers Squibb Co.'s saxagliptin.

It's likely either dutogliptin or Basel, Switzerland-based Roche AG's Phase III diabetes drug R1579 would come behind those products, Sanderson predicted.

Whitehouse Station, N.J.-based Merck & Co.'s Januvia was the first DPP-4 inhibitor to reach the market, gaining approval in 2006.

As a class, the DPP-4 inhibitors represent a $10 billion market opportunity, leaving room for multiple blockbuster drugs in the space, Shawver said.

San Diego-based Amylin Pharmaceuticals Inc.'s diabetes drug Byetta, a GLP-1 analogue, has been associated with cases of pancreatitis, a condition that has "never been observed with DPP-4 inhibitors," Shawver said.

A comparison of Byetta and Januvia prescriptions is an indication, she said of the differences and advantages of the two classes of drugs. While Byetta's prescriptions are flattening, Januvia prescriptions are on a "steep incline," she said.

Phenomix also has a hepatitis C virus compound in preclinical development that it hopes to move into the clinic this quarter.