Pulling in two more gastrointestinal drug candidates, DOR BioPharma Inc. signed a letter of intent to acquire Danish biotechnology company Gastrotech Pharma A/S for $9 million in shares and up to $30 million in milestone payments.

As Miami-based DOR prepares to file a new drug application for its first potential product, orBec, it will take on development of two Phase II products, called GTP-010 and GTP-200.

DOR began looking for ways in the last year to build a pipeline behind orBec and saw synergy with Gastrotech's products.

"We quickly liked what we saw there in terms of the two clinical-stage products," said Michael Sember, DOR's president and CEO. "We liked the focus on peptide therapy."

The acquisition not only will give DOR a presence in Copenhagen and access to Gastrotech's largest investor, Nordic Biotech, but also it provides DOR with the opportunity to list shares on the Copenhagen Stock Exchange and maintain a dual listing in Denmark and the U.S.

On Tuesday, DOR reported that the American Stock Exchange intends to delist the company's common stock for failing to maintain more than $6 million of stockholders equity following sustained losses from continuing operations in three of its four most recent fiscal years. The company is appealing the decision, and the acquisition of Gastrotech is just one step DOR is taking to build shareholder value.

"We are working diligently to get back in compliance, so there are a couple of efforts ongoing to get that accomplished," said Evan Myrianthopoulos, DOR's chief financial officer. "This [acquisition] is one of the building blocks for the bigger effort of growing the company."

Under the agreement with Gastrotech, DOR will issue the Danish company's stockholders $9 million in DOR shares priced at the 10-day volume-weighted average price just prior to the close of the transaction. The price, however, may not dip below 30 cents or rise above 45 cents, and the number of shares issued will remain between 20 million and 30 million.

The $30 million in milestones will come in the form of cash or stock once Gastrotech's products achieve certain developmental, regulatory and commercial outcomes. Two-thirds of those payments, or $20 million, are tied to the first product sales that reach $50 million and $200 million.

DOR plans to maintain the Copenhagen office, overseeing clinical development efforts in Europe. Gastrotech's CEO Hans Schambye will become DOR's chief operating officer.

"One of the reasons why we were interested in Gastrotech, aside from the products, is their location," Sember said. The region, particularly "Denmark, is very well thought of in terms of the clinical research that goes on there. So it's a very good place for us to do a great deal of our clinical development."

The first product that DOR gains, GTP-010, is an analogue of glucagon-like peptide-1 (GLP-1). It is being studied in collaboration with Indianapolis-based Eli Lilly and Co. in a Phase II, double-blind, placebo-controlled trial to treat pain associated with irritable bowel syndrome (IBS).

Data have shown that GLP-1 can reduce the gastrointestinal contractions associated with IBS and other disorders. IBS affects more than 80 million people worldwide and is characterized by symptoms of pain or discomfort in the digestive tract or abdominal wall, as well as an abnormality of bowel habit. A first-generation injectable form of GTP-010 has a market potential of $600 million worldwide.

The second product, GTP-200, is based on ghrelin, a naturally occurring peptide hormone that stimulates growth hormone secretion, induces appetite and modifies metabolism. Data have shown that the product has a positive effect on regulation of appetite, food intake and metabolism. GTP-200 recently completed patient treatment in a Phase I/II trial for cancer cachexia, a serious condition of abnormal weight loss, weakness and general bodily decline. It affects about 1 million cancer patients in the U.S. and Europe and has a market potential of about $4 billion.

"We estimate that both of them would be able to reach the market in the 2010-2011 time frame," Schambye said.

GTP-010 also has an application in the treatment of functional dyspepsia, and GTP-200 is being studied for the treatment of gastrectomized patients and several other indications outside of cancer cachexia.

"We have an opportunity to take them forward in several other very interesting indications, so we have more shots on goal," Schambye said.

DOR intends to file a new drug application for its lead product orBec (oral beclomethasone dipropionate) in early 2006 as a treatment for intestinal graft-vs.-host disease (iGVHD), a serious complication of bone marrow transplantation for cancer. The product failed to hit a primary endpoint in a Phase III trial by showing a statistically significant benefit over placebo in the median time to treatment failure at study day 50. But it did show significance at study day 80, a secondary endpoint, and it reduced mortality by 70 percent.

Founded in early 2003 based on technology developed at the Sahlgrenska University Hospital in Sweden, Gastrotech has operated as a four-person virtual company since inception. Its largest shareholder, Nordic Biotech, a Copenhagen-based venture capital firm, is subject to a staged lockup period in connection with new DOR shares that it will own. The acquisition will close following approval by a majority of DOR's shareholders.

By building a presence in Denmark, DOR gains access to a whole new group of investors.

"The Copenhagen Stock Exchange is quite receptive to biotech IPOs these days," Schambye said, adding that venture capitalists and other investors are familiar with the technology that led to GTP-010 and GTP-200. "The investors here understand these programs and are able to value them."

New York-based BIO-IB LLC acted as financial adviser to DOR for the transaction.

As of June 30, the company had $3.2 million in cash and cash equivalents and about 50.6 million common shares outstanding. Its stock (AMEX:DOR) rose 1 cent Wednesday to close at 30 cents.