Two months after receiving FDA approval for Dacogen to treat myelodysplastic syndromes, MGI Pharma Inc. licensed rights to the drug outside North America to Cilag GmbH.

Dacogen (decitabine) currently is in a Phase III survival trial in Europe, with interim data expected later this year. Cilag, a unit of New Brunswick, N.J.-based Johnson & Johnson, could file for approval there as early as the first half of 2007.

Through its Janssen-Cilag companies, J&J has a "great deal of experience in the hematology/oncology field," said Lonnie Moulder, MGI's president and CEO, adding that the company develops and markets the multiple myeloma drug Velcade (from Millennium Pharmaceuticals Inc.) in Europe. "It was just a very good match for us."

The agreement calls for about $82 million in payments from Cilag, including a $10 million up-front payment and $47 million in milestones based on development goals, approvals in Europe and Japan, as well as the achievement of certain sales targets. The up-front and milestone payments would be shared between MGI Pharma and Dacogen's initial developer, SuperGen Inc., of Dublin, Calif.

MGI Pharma also will receive from Cilag $25 million in research and development funding over the next three years. The company began a global, pivotal Phase III program in the middle of 2005 under an FDA special protocol assessment testing Dacogen in acute myeloid leukemia patients. ThinkEquity Partners LLC said in a research note that results should be available by the end of next year and approval could double the market for Dacogen.

The drug also is the subject of Phase II work in chronic myelogenous leukemia, and several Phase I trials are using it in combination with other cancer agents in various tumors.

"Because Dacogen is part of a very broad development program and has potential for multiple indications," Moulder said, "it was important to have a strong development partner alongside us that was contributing to the R&D costs."

MGI Pharma will receive a double-digit royalty from Cilag on Dacogen's net sales in each country covered by the agreement. While Moulder could not disclose the exact royalty percentage, he did say that MGI Pharma is obligated to pay SuperGen a 20 percent to 30 percent royalty on net sales of Dacogen, placing the figure from Cilag even higher.

"The net royalty benefit to MGI is in single digits," Moulder said.

Analyst Joel Sendek, of Lazard Capital Markets LLC in New York, wrote in a research note that the average net royalty to MGI is potentially around 9 percent on ex-U.S. sales. His firm forecast an approval and launch in Europe of Dacogen for MDS in early 2008, with sales of $30 million and $50 million in the first two years, which translates to MGI Pharma royalties of $2.7 million and $4.5 million, respectively.

Sendek said a competitor of Dacogen - Boulder, Colo.-based Pharmion Corp.'s Vidaza - should receive European approval also in early 2008, and would have a higher adoption rate than Dacogen because of its subcutaneous dosing regimen, which enables patients to administer the drug at home.

Hematologists "are not reimbursed for subcutaneously administering the drug," Sendek said. "For Dacogen, self administering an I.V. infusion at home would be less feasible."

Dacogen received FDA approval for MDS in early May based on Phase III data that demonstrated an overall response rate of 21 percent in treated patients, compared to 0 percent in the supportive care arm. (See BioWorld Today, May 4, 2006.)

The drug was launched later in the month and is expected to make $25 million in sales this year, eventually peaking at $250 million in the U.S. MGI Pharma has retained all rights to Dacogen in the U.S., Canada and Mexico.

The company gained exclusive worldwide rights to the product from SuperGen in summer 2004. (See BioWorld Today, Sept. 2, 2004.)

Aside from Dacogen, MGI Pharma is developing Saforis, an oral formulation of glutamine to treat oral mucositis. The company has submitted a new drug application and has a PDUFA date scheduled for October.

It also plans to file an NDA for Aquavan (fospropofol disodium), a short-acting anesthetic, in the first half of 2007 following Phase III data. Within the same time frame, MGI Pharma expects to seek a supplemental approval for Aloxi in patients with postoperative nausea and vomiting.

MGI Pharma's stock (NASDAQ:MOGN) fell 26 cents Thursday to close at $21.19. SuperGen's (NASDAQ:SUPG) rose 39 cents, or 11 percent, to close at $3.94.