Talks of an additional trial for the parathyroid hormone nasal spray (PTH1-34) to treat osteoporosis led Nastech Pharmaceutical Co. Inc. and Procter & Gamble Pharmaceuticals Inc. to amend their 10-month-old agreement - meaning Nastech will not receive $15 million in milestone payments this year as expected.

Instead, $5 million of the money is deferred to the start of an additional Phase II dose-ranging study, and $10 million will be paid on the initiation of a Phase III trial.

Nastech investors weren't pleased, as the company's stock (NASDAQ:NSTK) dropped $2.99 Tuesday, 15.6 percent, to close at $16.20.

The start of the Phase II and Phase III trials could occur concurrently, sometime in 2007, but Steven Quay, Nastech's chairman, president and CEO, urged analysts and investors to take a conservative view and "assume that they will be sequential."

A Phase III trial was expected to begin at the end of this year, following the completion of a Phase II biomarker study and the $15 million milestone payment. But that study is taking longer than originally thought.

Quay said Nastech had no knowledge of the delay until a Nov. 16 meeting with Cincinnati-based P&G, at which time P&G requested an additional Phase II trial to help design a Phase III and thus strengthen a 505(b)(2) filing for PTH1-34.

FDA approval for new osteoporosis drugs typically is based on long-term fracture data. The ongoing Phase II study is measuring blood markers of both bone formation and bone resorption. They will "serve as surrogate markers to bone mineral density, or BMD," Quay said, "which is itself a surrogate marker to long-term fracture incidents."

He would not give details of the proposed Phase II trial, but did stress that the study is not required by the FDA for a 505(b)(2) filing. It is simply "a prudent step before launching into a large and expensive Phase III bone mineral density study," he said.

Phase II osteoporosis trials tend to range from three months to nine months, depending on their clinical endpoint, Quay said, and the additional Phase II study is expected to start after the current one ends. P&G and Nastech originally "projected that under an aggressive timeline" the ongoing Phase II would be complete before the end of this year, Quay said. "This study is now expected to be completed during the second quarter of 2007."

With the added study, a Phase III trial may be pushed to late 2007 or early 2008. It will test PTH1-34 against the injected form of PTH, marketed as Forteo by Indianapolis-based Eli Lilly and Co., to evaluate BMD at a single skeletal site. Forteo's approval enables Nastech to piggyback on its data, allowing for a 505(b)(2) new drug application that demonstrates six months of BMD change with the nasal formulation.

P&G and Bothel, Wash.-based Nastech signed their $577 million agreement for PTH1-34 in February. The deal entitles Nastech to receive escalating, double-digit royalties and co-promotion rights for the product. (See BioWorld Today, Feb. 2, 2006.)

Since then, Nastech has received $17 million in payments, and P&G started the ongoing Phase II biomarker study in patients with low bone mass. It also has completed a pharmacokinetic study in postmenopausal women and elderly men that demonstrated a positive safety profile over a range of doses and produced similar exposure levels compared to Forteo.

PTH1-34 is a fragment of the naturally occurring human parathyroid hormone that regulates calcium and phosphorus metabolism. The injectable form has been shown to increase BMD and significantly reduce fractures in postmenopausal women. Forteo had sales of $149 million in the third quarter.

Nastech believes it can capture a share of that market with the more convenient nasal spray formulation.

Aside from osteoporosis, Nastech and its partners are developing products for diabetes, obesity, respiratory diseases and inflammatory conditions. The company received a not-approvable letter in July for its generic intranasal calcitonin-salmon formulation to treat osteoporosis due to an FDA concern of potential immunogenicity that could result from an interaction between calcitonin-salmon and chlorobutanol, the preservative in the formulation. Nastech later submitted a complete response to the FDA showing that a comparison of its product and the innovator drug, Miacalcin (Novartis AG), indicated no evidence of a structural or conformational change in the peptide, and no increase in the potential to aggregate as a result of the preservative change. (See BioWorld Today, July 17, 2006.)