Genelabs Technologies Inc. will receive up to $12 million after licensing exclusive Japanese rights to an investigational lupus drug to Tanabe Seiyaku Co. Ltd.

The deal centers on prasterone, a product in the regulatory review process in the U.S. and Europe for the chronic autoimmune disease, and fits Genelabs' business model like a glove. The Redwood City, Calif.-based company already has a U.S. partner for Prestara, as the compound is labeled in the U.S., and has entered advanced partnering discussions for European territories, where it is called Anastar.

"Tanabe has a very well demonstrated ability both on the drug development side and commercialization side," Genelabs President James Smith told BioWorld Today. "And they are now growing a franchise in rheumatology, with Remicade probably its most recognizable brand in that field for rheumatoid arthritis. Prasterone would fit nicely within that portfolio."

Remicade (infliximab) was developed by Centocor Inc., of Malvern, Pa.

He added that Osaka, Japan-based Tanabe saw the partnership as an opportunity to tap a significant market with an unmet medical need. Genelabs' stock (NASDAQ:GNLB) climbed 14 cents Wednesday to close at $3.06.

The product, a synthetic form of dehydroepiandrosterone (DHEA), acts as a supplement to the human hormone in which lupus patients are deficient. It also appears to have immunologic effects, such as changing cytokine profiles in patients, Smith said.

But prasterone remains under the scrutiny of regulatory approval, most notably in the U.S. A year and a half ago, the FDA issued an approvable letter related to Genelabs' new drug application, which required a confirmatory trial that remains under way. (See BioWorld Today, Sept. 3, 2002.)

"The first patient was enrolled in that trial January of last year, and we are at a point where we are very close to completing the enrollment," Smith said of the 150-patient study. "At the completion of her treatment, which will define the end of the double-blinded phase of the trial, we will begin the process of un-blinding the data. We anticipate reporting results on a top-line basis, and then completing all the detailed analyses, writing the report and submitting it to the FDA probably within a quarter from the time when the study is completed."

Genelabs licensed in November 2000 prasterone's North American rights to Watson Pharmaceuticals Inc. in a deal that could bring up to $45 million in milestone payments to Genelabs if the product is approved. Smith said the Corona, Calif.-based specialty pharmaceutical firm was chosen as a partner given its franchise in women's health products, as well as its commercialization structure and the attention it affords Prestara. (See BioWorld Today, Nov. 14, 2000.)

He also said the company remains in advanced partnering talks for Europe, where regulatory authorities are reviewing a marketing application as well. But while Genelabs awaits further regulatory guidance in those territories, the Japanese licensing arrangement provides an immediate source of funds.

Terms call for Genelabs to receive milestone payments and fees of up to $12 million, including a $2 million non-refundable initial license fee. The milestone payments are payable through the time of National Health Insurance price listing in Japan, based on pre-determined development goals. Tanabe is responsible for obtaining regulatory approval of prasterone in Japan, including conducting and funding any further development work, such as a clinical trial in that area.

Should the product receive approval, Genelabs would receive royalties on sales in Japan. In addition, Tanabe also agreed to purchase $2.6 million worth of equity in Genelabs, buying 818,897 common shares at about $3.18 apiece. The per-share price represents a 15 premium to the average of the closing prices for 10 days prior to the agreement.

"Our business model is to focus on drug discovery and development, commercialize products through partners, and our revenue is generated through milestone payments and royalties," Smith said.

Beyond prasterone, Genelabs' internal efforts are focused on a discovery program for hepatitis C virus. From that program, the company has selected a lead compound for preclinical development. Another preclinical compound is an antifungal candidate. Genelabs also has a vaccine for hepatitis E virus under clinical development at London-based GlaxoSmithKline plc.