Millennium Pharmaceuticals Inc. restructured its collaboration for Integrilin, granting exclusive U.S. development and commercialization rights to Schering-Plough Corp. and trading its profit-sharing arrangement for a significant royalty and up to $85.5 million in payments.

The companies have co-promoted and shared in the cardiovascular drug's profits in the U.S. since 2002, when Millennium completed a merger with COR Therapeutics Inc. Schering-Plough began working with COR on Integrilin in 1998. (See BioWorld Today, Dec. 7, 2001.)

Terms call for Kenilworth, N.J.-based Schering-Plough to pay Millennium a $35.5 million up-front payment, as well as royalties over the U.S. lifespan of Integrilin, and about $45 million to $50 million for existing Integrilin inventories. The U.S. patent for Integrilin is set to expire in 2014.

"I think it was the right move; I was not expecting it this quickly," said Christopher Raymond, analyst with Chicago-based Robert W. Baird & Co. "Integrilin has been perceived as a drag on the stock for some time, almost since they bought it with the COR acquisition."

In 2001, when the COR acquisition was first announced, Millennium's stock fell more than 16 percent, and was closing at just less than $30 a share. The company's stock (NASDAQ:MLNM) fell 9 cents Monday, to close at $9.84.

The new arrangement with Schering-Plough includes minimum royalty payments of $85 million in 2006 and again in 2007. Integrilin's U.S. sales in 2004 were about $301 million. Based on that figure, Millennium is getting about a 28 percent royalty initially, assuming sales remain level. But sales are expected to grow to $447 million in 2006 and $486 million in 2007, according to Baird's model. While Millennium would not give the deal's royalty rate, Raymond believes it's "somewhere north of 20 percent."

There are some extraordinary conditions that could reduce the minimum royalties in the first two years, such as a Millennium decision to promote another GP IIb-IIIa inhibitor, or if there is a material breach of the supply agreement that leads to a negative impact on the sales. There are no royalty minimums beyond 2007.

Cambridge, Mass.-based Millennium said the payments from the restructured relationship, as well as the cost savings, will be at least equivalent to the value of the current profit-sharing arrangement. The agreement, which is subject to government clearance, is expected to become effective Sept. 1.

"I view it positively. It makes the story a lot cleaner," Raymond told BioWorld Today. "More focus can be paid to Velcade and the opportunities beyond Velcade in their pipeline."

Integrilin, a market leading GP IIb-IIIa inhibitor, is most often used as an acute treatment in hospitals, labs and emergency rooms to treat patients with acute coronary syndrome. In addition to marketing Integrilin, Schering-Plough also sells the cholesterol-lowering agents Vytorin and Zetia, and it has a thrombin receptor antagonist (TRA) in early stage trials. That product is under development for use in the hospital and primary care setting as a once-daily, anti-platelet agent to prevent thrombotic vascular events in patients with atherosclerosis. It could be administered in combination with agents such as Integrilin in treating acute coronary syndrome.

With Schering-Plough taking on all U.S. sales responsibilities for Integrilin, both companies agree that Integrilin can be more efficiently marketed to achieve a greater profitability over time.

"It is our belief," said Deborah Dunsire, Millennium's incoming president and CEO, "that putting Integrilin in one company that has a specific focus on CV [cardiovascular], and has the infrastructure behind it, along with other products in CV, is the best way to optimize the revenue in Integrilin."

Schering-Plough will hire a significant number of Millennium's U.S. sales representatives and managers assigned to Integrilin. Millennium has said it is reducing its head count by 200 people, which, along with the elimination of certain clinical trial costs and advertising and promotions, will reduce the company's research and development, and selling, general and administrative expenses by 15 percent.

Schering-Plough will continue to market Integrilin in Canada and other international markets, excluding Europe. In June 2004, Millennium reacquired the European rights from Schering-Plough and licensed them to London-based GlaxoSmithKline plc. (See BioWorld Today, June 24, 2004.)

The transition from a profit-sharing to a royalty arrangement frees Millennium to focus on oncology. Integrilin has served as a transitional product for Millennium, providing the revenue needed to create a commercial infrastructure to launch Velcade (bortzeomib) injection for multiple myeloma in 2003.

While Wall Street has been preoccupied with a promising competitor, Celgene Corp.'s Revlimid, Raymond said Velcade will outperform expectations. A new drug application for Revlimid, a derivative of Thalomid, Warren, N.J.-based Celgene's brand name for thalidomide, has been filed with the FDA. The PDUFA date is set for Oct. 7.

While Revlimid poses a real threat to Velcade in multiple myeloma, Raymond still sees an upside to the story in the near-term.

"It looks like Velcade really is taking share in front-line myeloma from Thalomid, and is beginning to dominate second-line treatment," he said. "What we've been looking for is a sign that front-line use will pick up, and it's just now starting."

Baird's Velcade revenue estimates for this year are $216 million, compared with $193 million expected by consensus. Approved for second-line and third-line treatment of multiple myeloma, the product is in development as a front-line treatment in that indication, as a first- and second-line treatment in non-small-cell lung cancer, and for bronchoalveolar carcinoma, non-Hodgkin's lymphoma and other solid tumors.

Millennium's other clinical-stage oncology products include MLN2704 in prostate cancer, and MLN518 for acute myeloid leukemia. The company expects to move MLN8054 into clinical trials for solid tumors this year.

The remainder of the company's pipeline consists of inflammation and cardiovascular products, including MLN02 for Crohn's disease and ulcerative colitis, MLN1202 for rheumatoid arthritis and multiple sclerosis, and MLN2222 for coronary bypass, among others.

Marsha Fanucci, Millennium's senior vice president and chief financial officer, said the restructured agreement with Schering-Plough will result in charges to be discussed in the third-quarter earnings call. But, she said, the company is still on track to report a non-GAAP net loss of less than $100 million in 2005, and to reach profitability in 2006.