West Coast Editor

NPS Pharmaceuticals Inc. wasted no time selling Preotact royalties after retooling its overseas license deal with Nycomed A/S for the parathyroid hormone for osteoporosis - yet to win clearance in the U.S., where it's branded as Preos - and the company is getting $50 million up front, with another $25 million more due from Drug Royalty Corp. in 2010 if sales goals are met.

Shares of NPS (NASDAQ:NPSP) closed Tuesday at $4.40, down 2 cents.

The potential $90 million, 2004 deal with Roskilde, Denmark-based Nycomed was changed earlier this month to give Nycomed ex-U.S. rights to Preotact except for Japan, where NPS keeps rights, and Israel, which is the subject of an existing deal. NPS, of Parsippany, N.J., was allowed to sell Preotact royalties under the new terms.

"It was essentially to make selling off the royalty stream possible," said Brandi Simpson, senior director of investor relations for Parsippany, N.J.-based NPS, but an added benefit was that Nycomed took over the manufacturing responsibility for its supply of the drug.

"We had better things to spend our time on," Simpson said. Proceeds of the arrangement with Drug Royalty Corp., a privately held investment management firm in Toronto, will be used to pay for outstanding convertible 3 percent notes, due in 2008. "We wanted to take care of that by the end of the year," she said.

Although Paul Capital as a royalty buyer might be more familiar to some industry watchers, DRC pre-dates Paul, having been established in 1992, noted Paul Kirkconnell, managing director of DRC, which has announced an $800 million fund, "but we have access to more capital."

Others marketing products that involve royalty deals with DRC include Amgen Inc., Applied Biosystems Inc., Chiron Corp. (now Novartis AG), Cubist Pharmaceuticals Inc., Genentech Inc. and MedImmune Inc., as well as big pharma players such as GlaxoSmithKline plc, Johnson & Johnson and Bristol-Myers Squibb Co.

In May, DRC entered a major deal with Massachusetts General Hospital for future European royalties on Enbrel (etanercept, Amgen Inc.). Under the terms, MGH and the inventors of some of the technology used to develop Enbrel got $300 million in proceeds less accrued royalties for the period from July 1, 2006 to December 31, 2006.

"We have a small group of strategic investors," Kirkconnell said. "Obviously, a $300 million deal doesn't fit very well into an $800 million fund. We have access to capital for any royalty deal, period," he said.

NPS had news in May, too, when the FDA followed an approvable letter asking for more information on Preos with a suggestion that NPS do another trial to settle concerns about hypercalcemia in patients using the product, which is designed to reduce the risk of fractures in postmenopausal women. (See BioWorld Today, May 4, 2006.)

"We're in the process of finding a partner to support the development of Preos for osteoporosis," Simpson said, and the compound is undergoing Phase II research for hypoparathyroidism. In osteoporosis, Preos would face stiff competition from Indianapolis-based Eli Lilly and Co.'s Forteo (teriparatide).

NPS also has teduglutide, an analogue of glucagon-like peptide 2, a naturally occurring hormone that regulates proliferation of the cells in the small intestine. Enrollment of patients has completed in a Phase III study in adult short bowel syndrome, and the goal is to determine the drug's ability to reduce dependency on total parenteral nutrition.

"We'll finish dosing the patients some time [this month]," Simpson said. Top-line data are due in the second half of this year, with a new drug application filing likely if results are positive. A Phase IIa proof-of-concept study in Crohn's disease is finished, and development continues in that indication.

NPS gets revenues from Sensipar (cinacalcet), licensed to and sold by Thousand Oaks, Calif.-based Amgen Inc. for hyperparathyroidism. That deal meant $8.3 million for NPS during the quarter ended March 31, but NPS has borrowed $175 million against the royalties, Simpson noted. The amount should be paid off in late 2010 or early 2011.

As of March 31, NPS had about $32.1 million in cash and cash equivalents, and $99.7 million in marketable investment securities.