Forest Laboratories Inc. is picking up rights to ceftaroline, a late-stage injectable antibiotic for Gram-positive bacterial infections, through the acquisition of privately held Cerexa Inc. for $480 million in a cash-for-stock transaction.

The companies signed a definitive merger agreement, which also includes a provision calling for an additional $100 million in a one-time milestone payment if 12-month sales of ceftaroline exceed $500 million at any time during the first five years of commercialization. The deal is expected to close during the first three months of 2007, during which time Forest will incur a one-time after-tax charge of 96 cents per share.

In exchange, Forest gains worldwide rights, except for Japan, to ceftaroline acetate, a broad-spectrum, hospital-based cephalosporin antibiotic that's demonstrated promising results against resistant strains of Gram-positive bacteria, including methicillin-resistant Staphylococcus aureus (MRSA). Results from a 99-patient Phase II study in complicated skin and skin-structure infections (cSSSI) showed a clinical cure rate of 96.7 percent for patients treated with ceftaroline vs. 88.9 percent for those given vancomycin.

Neither company could be reached for comment, but Forest said it intends to move the product into a Phase III trial in cSSSI caused by MRSA in the first quarter. Ceftaroline has fast-track designation in that indication.

A second Phase III trial in community-related pneumonia is set to start in the second quarter.

If those studies are successful, ceftaroline could reach the market around 2010 or 2011 in those indications. Forest said it also plans to investigate additional areas for supplemental new drug applications.

In the U.S., Forest likely would rely on its existing hospital-based sales force, though it probably would explore options such as out-licensing for marketing outside of the U.S.

Ceftaroline, which previously was part of Alameda, Calif.-based Peninsula Pharmaceuticals Inc.'s pipeline, was spun out in mid-2005 into new firm Cerexa when Peninsula was acquired by Ortho-McNeil, a unit of New Brunswick, N.J.-based Johnson & Johnson, for $245 million. (See BioWorld Today, April 20, 2005.)

Cerexa, of Alameda, Calif., raised $50 million in its first financing round in August 2005 to take the drug into Phase II trials. That round was led by Seattle-based Frazier Healthcare Ventures and Menlo Park, Calif.-based New Leaf Venture Partners. (See BioWorld Today, Aug. 24, 2005.)

Cerexa has since expanded its anti-infective portfolio. The company licensed ME1036, a preclinical broad-spectrum parenteral carbapenem for Gram-positive and Gram-negative bacterial infections, from Tokyo-based Meiji Seika Kaisha Ltd. last month to develop the drug against drug-resistant pathogens, such as MRSA, vancomycin-intermediate susceptible Staphylococcus aureus and vancomycin-resistant Enterococcus faecalis.

Through its acquisition, Forest also gains worldwide rights to that product as well, excluding Japan and certain other Asian countries, and also obtains an option to another early stage antibiotic.

For New York-based Forest, the Cerexa deal falls in line with its ongoing business strategy to add new pipeline products that can offset upcoming patent expirations on several of its marketed products, including its blockbuster anti-depressant, Lexapro. It also fits with Forest's previously announced intentions to move into antibiotics, a market estimated to be between $5 billion and $7 billion in the U.S. and more than $9 billion worldwide.

The firm signed a deal in February with Louisville, Colo.-based Replidyne Inc. to commercialize Orapem (faropenem medoxomil), Replidyne's oral antibiotic for $50 million up front and undisclosed milestones. Replidyne submitted a new drug application last year, hoping for approval in acute bacterial sinusitis, community-acquired pneumonia, acute exacerbations of chronic bronchitis and uncomplicated skin infections, but the FDA returned with a non-approvable letter in October calling for additional trials. (See BioWorld Today, Feb. 14, 2006, and Oct. 24, 2006.)

Shares of Forest (NYSE:FRX) closed at $51.10 Thursday, down 20 cents.