Six-year-old Halozyme Therapeutics Inc. signed a marketing and distribution agreement with Baxter Healthcare Corp. for Halozyme's recombinant human hyaluronidase enzyme product to be used as a spreading agent.

The San Diego-based biopharmaceutical company intends to file a new drug application for Enhanze SC in the first quarter.

Baxter, of Deerfield, Ill., gains exclusive rights to market, distribute and sell the product in the U.S. and Puerto Rico

"We're very excited about this partnership because it represents a significant milestone for Halozyme," said Jonathan Lim, the company's chairman and CEO. "We can also mutually agree to pursue other territories for Enhanze SC, so this could potentially expand beyond the U.S. and Puerto Rico."

Lim estimates that the market potential for Enhanze SC in the field of ophthalmology is about $50 million in the U.S. and $100 million worldwide annually. But the product might provide benefits in drug delivery outside of ophthalmology. The NDA will seek approval of the product as a drug delivery agent of local anesthesia, contrast agents, and for subcutaneous fluid replacement, or hypodermoclysis. Baxter would market it to physicians in the in-patient and outpatient settings, most of whom would be ophthalmologists that have used a Wyeth Inc. product called Wydase.

Upon FDA approval, Baxter and Halozyme will be equal partners in the commercialization of the product.

"It's a profit-sharing arrangement," Lim told BioWorld Today, "and the important point there is it is a 50/50 split of gross profits, which means net revenues minus costs of goods sold, rather than a split of operating profit. It means Baxter bears the sales and marketing costs."

Enhanze SC is the first product in Halozyme's Enhanze Technology portfolio. The product is a recombinant form of the naturally occurring human enzyme hyaluronidase and is being studied for its ability to break down hyaluronic acid, which is found in tissues throughout the body. When injected in the skin or muscle, it temporarily digests the hyaluronic acid gel, enhancing the penetration and diffusion of other drugs.

Besides the other potential areas, Halozyme and Baxter could expand the agreement to include other dosage forms and indications. Halozyme also has the right to invest in marketing if it opts to do so "in the event that we feel we can add more incremental value to the marketing of the product," Lim said.

Halozyme estimates about 6.4 million local anesthesia procedures in ophthalmology occur each year worldwide, but Enhanze SC also could be used with lidocaine and bupivacaine, which are administered for most minor surgical operations requiring local anesthesia.

If approved, Enhanze SC would replace Madison, N.J.-based Wyeth's Wydase (hyaluronidase) injection product, a discontinued bovine enzyme previously used for anesthesia diffusion enhancement. It was withdrawn from the market in 2001 because of manufacturing issues, Lim said.

Recombinant human hyaluronidase enzyme - or rHuPH20, for short - has more than 100 times higher purity than the active ingredient in Wydase.

A hyaluronidase product by Irvine, Calif.-based ISTA Pharmaceuticals Inc., called Vitrase, received FDA approval in May for use as a spreading agent to facilitate the dispersion and absorption of drugs. Vitrase is a formulation of highly purified, preservative-free ovine hyaluronidase. The company expects to launch the product later this year. (See BioWorld Today, May 7, 2004.)

Halozyme expects that Enhanze SC could reach the market in late 2005 or early 2006. It is seeking a DESI (Drug Efficacy Study Implementation) review by the FDA.

Halozyme also is working to create a medical device for infertility called Cumulase, as well as a therapeutic biologic for oncology called Chemophase. Its products would offer safer alternatives to slaughterhouse-derived extracts that carry risks of pathogen contamination, immunogenicity and toxicity, the company said.

Earlier this year, Halozyme signed nonexclusive, global distribution agreements for the commercialization of Cumulase, which has about a $10 million market potential. The company expects to file a 510(k) application for Cumulase in the fourth quarter.

Chemophase is at an earlier stage of development.

"We are currently using preclinical models to assess the efficacy of this compound and we intend to file an IND in the second quarter of 2005," Lim said.

In other news, the company reported its second-quarter financial results, posting a net loss of $2.1 million, or 5 cents per share, compared to last year's second-quarter loss of $400,000, or 5 cents per share. As of June 30, the company had cash and cash equivalents of $5.9 million. It reported a net cash burn of $1.5 million in the second quarter.

The company's stock (OTC BB:HZYM) dropped 20 cents on Monday, to close at $1.90.