West Coast Editor

In an uncommonly structured deal, Elan Corp. plc is backfilling its troubled pipeline with a Phase I drug candidate for Alzheimer's disease, paying Transition Therapeutics Inc. as much as $200 million - $15 million of that amount promised in the next two years - for the small-molecule AZD-103.

Toronto-based Transition's stock (TSX:TTH) rose C6 cents Wednesday to close at C75 cents (US67 cents).

The joint development and commercialization arrangement gives Transition $7.5 million this year and the same amount in 2007, with the possibility for up to $185 million in milestone payments.

Dublin, Ireland-based Elan and Transition will share the costs and operating profits of AZD-103, and each party's cost share and ownership interest may vary during the agreement, depending on "certain [unspecified] elections that may be made."

That's where the novelty comes in.

"Right now it's a 70/30 split," with Elan paying the bulk, said Tony Cruz, chairman and CEO of Transition. "But there comes a point where we can change that - increase our position or opt out and take a more traditional licensing agreement with a royalty stream."

Cruz said his firm has no preference at the moment, and just wants to make sure the compound "gets to the finish line as fast as possible."

Oral AZD-103 breaks down neurotoxic fibrils, allowing amyloid peptides to clear the body rather than form amyloid plaques. Transition acquired the compound through its buyout in March of Ellipsis Neurotherapeutics Inc. (of which Transition previously had held shares), also based in Toronto.

"When two amyloid betas get together and aggregate, the initial interaction is very weak," Cruz said, but then they start clumping more seriously, and the disease is difficult to stop.

AZD-103, which crosses the blood-brain barrier through an existing transporter, "prevents the interaction, and displaces existing aggregates by binding or competing at the same site," Cruz told BioWorld Today, adding that six-month studies showed no toxicity, despite giving the highest feasible toxicity dose to animals.

"We've searched 750 molecules, all in the same area, with very similar structures," and none could do what AZD-103 has done, at least so far, Cruz said.

News of the Transition deal didn't do much for Elan's shares (NYSE:ELN), which closed Wednesday at $15.54, up 2 cents.

Elan still suffers from problems with Tysabri (natalizumab), the multiple sclerosis drug partnered with Cambridge, Mass.-based Biogen Idec Inc. The firms withdrew Tysabri in February 2005, several months after launch, because of its link to cases of progressive multifocal leukoencephalopathy. This summer, the FDA allowed Tysabri back on the market, but many doctors have been wary of using it except in the sickest or refractory patients. (See BioWorld Today, June 6, 2006.)

Doing better for Elan is Prialt (ziconitide), the pain drug launched in the first quarter of 2005, which tallied full-year revenue of $6.3 million. Tokyo-based Eisai Co. Ltd. bought the European rights to Prialt early this year in a deal worth up to $100 million. (See BioWorld Today, Feb. 10, 2006.)

Eisai sells the world's leading Alzheimer's therapy, Aricept (donepezil), an acetylcholinesterase inhibitor approved by the FDA in 1996.

Two of Elan's compounds from its Alzheimer's disease immunotherapy program, partnered with Madison, N.J.-based Wyeth, are moving through the clinic. Phase II trials testing AAB-001, a humanized monoclonal antibody to A-beta, will undergo an interim analysis in the second half of this year, which also is when the interim peek is due for Phase I trials with ACC-001 (active A-beta immunotherapeutic conjugate). Elan also is moving forward with its own internal gamma and beta secretase Alzheimer's programs.

"They know this disease very well," Cruz said, conceding that Elan is "mitigating [its] risk, probably" with the Transition deal, but AZD-103 offers a different mechanism of action. "We did have multiple players at the table," he said.

Also in the Transition pipeline is a Phase II diabetes program, called Islet Neogenesis Therapy and partly partnered with Novo Nordisk AS, of Bagsvaerd, Denmark, in a potential $46 million deal. Novo has exclusive worldwide rights to research that combines an epidermal growth factor analogue with a gastrin analogue.

A separate program combines Byetta (exenatide, launched last year by Amylin Pharmaceuticals Inc., of San Diego) with gastrin to turn on the regeneration of islets in the body. Long-acting analogues of glucagon-like peptide-1 such as Byetta regulate blood glucose, but are approved only for a specific population of non-insulin-dependent diabetics.

The 70/30 structure of the Alzheimer's deal with Elan, including options for ownership change later, proves "a nice concept that I think others should use," Cruz said. "It's good for [Elan] and it's good for us."

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