Palatin Technologies Inc. could make more than $250 million via a strategic alliance with King Pharmaceuticals Inc. for the development and commercialization of Palatin's male and female sexual dysfunction candidate, PT-141.

PT-141, a Phase II candidate, is a melanocortin receptor agonist discovered by Palatin scientists using technology developed at the University of Arizona in Tucson. While it is currently being studied in a nasal formulation, company executives said they also intend to develop it as an oral product.

Carl Spana, president and CEO of Cranbury, N.J.-based Palatin, believes the Phase II program will be completed in mid-2005, allowing the partners to begin pivotal trials in late 2005 or early 2006. That would put the companies on track for approval in the first half of 2008.

Under terms of the agreement, Palatin and King will have a co-exclusive license to PT-141 in North America. King also gains the exclusive right to collaborate in the licensing or sublicensing of PT-141 with Palatin outside North America. Palatin maintains the option to create a urology specialty sales force to co-promote the product in the U.S., upon commercialization. The transaction is expected to close before the end of this quarter, the partners said in a prepared statement.

King would pay Palatin $20 million at closing, $5 million of which would consist of an equity investment in Palatin. In addition, upon achieving certain milestones, King could pay Palatin up to $100 million for achieving certain ED and female sexual dysfunction development and regulatory approval targets, a portion of which could consist of additional equity investments in Palatin, at King's option. After regulatory approval and commercialization of PT-141, King could also pay potential one-time milestone payments to Palatin totaling up to $130 million upon achieving specified annual North American thresholds, the companies said.

Going forward, the partners will share all development and marketing costs and all profits derived from sales of PT-141 in North America based on an agreed percentage. King and Palatin will seek a partner for PT-141 for territories outside of North America and will jointly share in collaboration revenues generated from those territories.

By signing King as a partner, Palatin gains access to an experienced sales force that is already selling Altace (ramipril), an ACE (angiotensin converting enzyme) inhibitor. According to Spana, the physicians who prescribe Altace would be the same physicians who would prescribe PT-141.

King, of Bristol, Tenn., in late July entered a definitive agreement under which Mylan Laboratories Inc., of Pittsburgh, will acquire King in a stock-for-stock transaction that initially was valued at $4 billion.

James Green, King's executive vice president for corporate affairs, told BioWorld Today the merger, expected to close later this year, would have no impact on the Palatin deal.

In about 20 studies that have included some 700 patients, Palatin has learned that P-141 is safe and effective in treating a range of men who suffer from erectile dysfunction, including men who would respond to Viagra, Cialis or Levitra, as well as those who do not, Spana told BioWorld Today. "We have not seen anything that gives us concern on the cardiovascular front, so we think that we have a highly differentiated product that will not have some of the concerns when it is used in patients with certain types of cardiovascular disease, such as patients taking nitrates or alpha-blockers," he said.

"We've also established that current therapy also could be used in conjunction with PT-141, meaning you could mix PT-141 with Cialis and Viagra and get a synergistic effect," Spana said.

Cialis, Viagra and Levitra, currently marketed ED drugs, are PDE-5 inhibitors, which target the vascular system. By contrast, PT-141 acts on the pathway that controls sexual function without acting directly on the vascular system, Spana said.

Also, studies indicate that PT-141 would be useful for 10 to 12 hours compared to Cialis (taladafil), made by ICOS Corp., of Bothell, Wash., and Eli Lilly and Co., of Indianapolis, which provides a 36-hour window. Viagra, made by New York-based Pfizer Inc., and Levitra, made by Leverkusen, Germany-based Bayer AG and London-based GlaxoSmithKline plc, last fewer than 10 hours.

Meanwhile, Palatin remains in the early stages of evaluating PT-141 in women. Spana hopes to begin enrolling in clinical trials this year, with data expected in 2005.

Palatin's stock (AMEX:PTN) gained 3 cents Friday to close at $2.66.

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