Gaining more than $120 million in potential milestone payments, SkyePharma plc signed a European marketing and distribution agreement with Medeus Pharma Ltd. for DepoMorphine to treat post-operative pain.

London-based SkyePharma accepted lower up-front payments in the deal, enabling it to secure a high royalty rate - between 35 percent and 50 percent - based on the product reaching certain sales thresholds.

"We were very keen to have more of our income revenue related," said Peter Laing, director of corporate communications at SkyePharma. "So the structure was very much what we were aiming for."

The European partnership comes a little more than a year after SkyePharma's U.S. marketing agreement with Endo Pharmaceuticals Inc. for DepoMorphine and another pain drug, Propofol IDD-D. In that deal, SkyePharma received a $25 million up-front payment and a promise of potential milestone payments totaling $95 million. SkyePharma also is entitled to a share of sales revenue from 20 percent to 60 percent dependent on certain sales thresholds. (See BioWorld Today, Jan. 6, 2003.)

Laing told BioWorld Today that the up-front payment from Medeus, of Stevenage, UK, was lower than what SkyePharma received from Endo, but he would not disclose the exact amount. He did say, however, that milestone payments are in excess of €100 million and that the company would receive the highest royalty - 50 percent - before the product reaches $100 million in sales.

The structure of the Medeus agreement is part of SkyePharma's goal to derive a greater share of its revenues from its products, instead of receiving larger up-front milestone payments. If SkyePharma hits all of its milestones - marketing approvals, commercial launches and sales targets - the money will more than cover the cost of manufacturing the product and additional clinical development required to gain and maintain approvals throughout the expanded European Union.

Medeus will cover all sales and marketing expenses, but the companies would share costs for Phase IV development, if deemed necessary.

SkyePharma believes the market potential for DepoMorphine in the U.S. and major European countries is in excess of $250 million, Laing said. The company filed for approval in the U.S. in July and in the UK in November. SkyePharma will pursue a mutual recognition approval in other European Union countries.

Laing said the company expects to receive an approvable letter from the FDA in May. "Therefore, we could get approval sometime by the end of this year in the U.S." he said. "In Europe, we'd expect UK approval at the end of this year, as well."

Full approval in the other European countries would occur sometime in the middle of 2006, Laing said.

DepoMorphine is a sustained-release injectable formulation of morphine sulphate for relief of moderate to severe post-operative pain. The product employs SkyePharma's DepoFoam technology, a sustained-release injectable delivery technology that consists of tiny lipid-based particles containing discrete water-filled chambers dispersed through the lipid matrix. DepoMorphine is given as a single epidural injection before or during surgery. It is designed to provide pain relief for up to 48 hours following surgery.

"We do believe it has significant advantages to the patient, anesthesiologist, surgeon and hospital," Laing said. "We're optimistic to command a premium price."

The company expects to price the product in the U.S. at $125 a procedure. The product offers an advantage to existing pain-relief products in that it does not require an in-dwelling catheter for continuous infusion, the company said. SkyePharma expects DepoMorphine to be used mainly in major surgical procedures such as abdominal surgery, orthopaedic surgery and Caesarean section. About 6 million of those procedures are conducted each year in the U.S., and about 5 million of them are done each year in Europe.

SkyePharma completed seven clinical trials of DepoMorphine in more than 1,000 patients. It demonstrated sustained dose-related analgesia and achieved statistical significance with its primary and several secondary endpoints.

SkyePharma's stock (NASDAQ:SKYE) rose $1.19 to close at $13.30.