Less than two months after conducting its initial public offering, GTx Inc. found a potential dream deal for an early clinical program focused on selective androgen receptor modulators (SARMs).

Ortho Biotech Products LP agreed to pay GTx up to $82 million for worldwide rights to andarine, GTx's most-advanced SARM compound being studied for muscle-wasting weight loss, or cachexia, that occurs from cancer and other chronic diseases. The money includes an up-front fee, additional licensing fees, as well as milestone payments.

And it doesn't end there.

GTx also could receive up to $45 million in payments for each additional back-up SARM compound licensed by Ortho Biotech.

"It's one of those offers you couldn't refuse," said Mitchell Steiner, vice chairman and CEO of GTx.

With the agreement, Ortho Biotech gains exclusive marketing rights worldwide. Johnson & Johnson Pharmaceutical Research & Development will cover all further clinical development and expenses of andarine, while Ortho Biotech will cover commercialization expenses. Both entities exist under the New Brunswick, N.J.-based Johnson & Johnson umbrella. Andarine has completed four Phase I trials and is slated to enter Phase II work sometime this year.

"For us to do a deal with our proprietary homegrown SARM program is wonderful," Steiner told BioWorld Today. "We end up getting resources we need to take our first lead compound forward with pharma, and we get validation that our program is of interest to somebody like Johnson & Johnson."

Another perk to the deal is the royalty structure. GTx will receive a double-digit royalty for all andarine sales worldwide, but the Memphis, Tenn.-based company also has an option for co-promotion rights in the U.S. for urology indications. If GTx elects to take that option, it would receive an additional royalty payment of more than 20 percent on all sales to urologists in the U.S.

Steiner said the company is setting up a specialized sales force to urologists in the U.S. He said GTx had no interest in rights outside the U.S. because it is not an international company. Also, it focuses mainly on men's health, and thus was not interested in rights to other indications.

The company could have waited until after completing the Phase II to form the deal, but Steiner said the terms were so good there was no need to wait.

GTx completed its IPO in February, raising $78.3 million with the sale of 5.4 million shares at $14.50 each. However, its stock (NASDAQ:GTXI) has since traded down, although it climbed 39 cents on Wednesday to close at $10.39. (See BioWorld Today, Feb. 4, 2004.)

"I don't know what the market is doing," Steiner said. "But GTx is continuing to do well, continuing to have basic fundamentals. The future is bright." He added that the company had a successful IPO and is "in it for the long haul."

He said the Ortho Biotech deal validates GTx's technology, giving the company committed funding without sacrificing back-end sales perks.

"We wanted a nice, balanced deal," he said. "Right now, this actually builds momentum and excitement that once we get to the market this is going to be a very attractive opportunity for the shareholders of GTx."

SARMs bind to testosterone receptors in the body. The lead drug, andarine, showed it could be safely administered in its four Phase I trials.

"If you look back at all the other companies that have SARM programs, they're all preclinical," Steiner said. "GTx is the first company, I believe, to be in patients, so we're clearly ahead of the pack."

Both men and women have androgen receptors. When testosterone binds to those receptors it can result in improved sexual function, a positive mood and an enhanced libido, as well as bone and muscle building. GTx's SARMs are designed to bind in a way that maximizes the benefits, but minimizes unwanted effects of testosterone, such as the risks to the prostate, liver and cardiovascular systems.

Aside from andarine, GTx has one other product in the clinic. The company is studying Acapodene (toremifene citrate) tablets in a Phase IIb trial to reduce the incidence of prostate cancer in men with precancerous prostate lesions, and in a pivotal Phase III trial to treat serious side effects of advanced prostate cancer therapy. (See BioWorld Today, Nov. 11, 2003.)