Washington Editor

Nastech Pharmaceutical Co. Inc. and Procter & Gamble Pharmaceuticals Inc. have ended a less than two-year-old partnership to develop and commercialize a nasally administered form of parathyroid hormone (PTH) to treat osteoporosis.

Shares of Nastech (NASDAQ:NSTK) tumbled $5.37 Wednesday, or 38.3 percent, to close at $8.62.

As a result of the breakup, Nastech has reacquired the rights to teriparatide (PTH1-34) nasal spray, a fragment of the naturally occurring human parathyroid hormone that regulates calcium and phosphorus metabolism.

The original February 2006 deal would have garnered Bothell, Wash.-based Nastech about $600 million. That agreement was amended 10 months later, which included a deferment of $15 million in milestone payments to Nastech.

The biopharmaceutical firm will receive $5.5 million in revenue in the fourth quarter related to the termination of the P&G deal, said Nastech CEO Steven C. Quay.

During a conference call Wednesday, he called Cincinnati-based P&G a "good partner" with whom Nastech had developed a "good working relationship."

Quay would not speculate about the reasons P&G made the decision to end the partnership, stating only that "major corporations make decisions for complex reasons, reflecting the concerns of various positions within a corporation, as well as the impact of financial and timing issues that can reach beyond any single program."

He said that his firm was in discussions with P&G as late as last week on the next steps for the clinical program for teriparatide nasal spray and had sent the Ohio company a protocol design for a Phase II study to evaluate change in bone-mineral density (BMD).

Quay noted that the FDA had indicated that change in BMD will be used as the primary endpoint for approval of the product.

"The reason the FDA allows change in BMD to be used as the endpoint for approval is that a strong correlation between BMD and the risks of osteoporosis, particularly the risk of fracture, has been established," he said. "The same correlation has not been established with blood biomarkers. These biomarkers have been thought to be a possible indicator that by demonstrating the impact a drug would have on bone-mineral density, but the relationship between the two is not yet well understood, especially with anabolic agents, bone-growth agents, like teriparatide."

The teriparatide nasal spray program, Quay said, is being developed under the FDA's 505 (b)(2) filing status, which allows the product's development program to be based on BMD studies, which take about six months to collect data in hundreds of patients, rather than fracture data, which can take up to two years and involve thousands of patients.

During the collaboration, P&G completed two clinical studies using teriparatide nasal spray. One study evaluated the pharmacokinetic (PK) profile of the product in healthy normal subjects, and the other trial demonstrated the response of bone turnover markers.

An important outcome of the PK study, Quay said, was the demonstration of a dose-dependent increase in the amount of PTH found in the bloodstream.

"Compared to the injected teriparatide, doses were found where the nasal spray was similar in the maximum blood level achieved as well as doses where it was similar in the total amount of PTH delivered," he said.

Quay said his firm will "move as quickly as possible" to complete its planned Phase II BMD study.

"We are hopeful we can dose the first patient in the first quarter of 2008," he said.

In the meantime, Quay said, the firm will be examining programs and initiatives for ways to reduce the company's expenditures in 2008 while maintaining its commitment to "increasing shareholder value by driving high-value initiatives."

Nastech's product pipeline includes its peptide YY product, a naturally occurring human hormone produced by specialized endocrine cells, which it is exploring as a therapy to treat obesity.

The company also is developing an exenatide product to treat Type II diabetes. Exenatide, also referred to as exendin-4, is a 39-amino-acid peptide that stimulates insulin secretion in response to elevated plasma glucose levels.