Looking to expand its orphan drug pipeline, Xechem International Inc. completed the acquisition of Ceptor Inc.

In the transaction, New Brunswick, N.J.-based Xechem will issue $6 million in convertible preferred stock to privately held Ceptor's shareholders, and assume about $300,000 of debt. No shares will be converted for at least 12 months, and Stony Brook, N.Y.-based Ceptor will operate as a wholly owned subsidiary of Xechem.

The acquisition provides Xechem pipeline opportunities based on a neuromuscular platform technology from which it expects to produce orphan drug products for internal development and large-market candidates for partnering. The technology includes carrier molecules that target any passenger molecules to skeletal muscle cells and nerve cells.

Ceptor's lead product, Myodur, is comprised of a carnitine carrier and leupeptin. That peptide inhibits the protease calpain, which degrades skeletal muscle. Xechem said the product could be used to treat muscular dystrophy because calpain is up-regulated in the disease, a process that could be interrupted by the inhibiting effect of leupeptin.

"Our business model is built around orphan drugs, and muscular dystrophy clearly is an orphan disease," Xechem Vice Chairman and President William Pursley told BioWorld Today. "It will be a small target to a highly devastating disease."

The company plans to file an investigational new drug application for Myodur to begin Phase I trials in the coming year.

Brought on board in the fall, Pursley's background lends itself to working in such a business model. Most recently, he served as CEO of Osiris Therapeutics Inc., of Baltimore, and in the past has held executive positions related to orphan drug development at Genentech Inc., of South San Francisco; Genzyme Corp., of Cambridge, Mass.; Bio-Technology General Corp., of Iselin, N.J.; and Transkaryotic Therapies Inc., also of Cambridge.

Xechem's business focus is specific to niche markets, which Pursley said are protected by orphan exclusivity, somewhat less rigid regulatory requirements and better reimbursement methods.

"We're bringing in technologies now to fulfill that platform," he said, "and many of Ceptor's potential products fill that void very nicely."

Other possible products that could arise from the acquisition include therapeutics for multiple sclerosis, amyotrophic lateral sclerosis (Lou Gehrig's disease), epilepsy, ototoxicity, nerve damage and muscle wasting. Ceptor's shareholders will receive milestone payments related to the development progression of its compounds.

Another product candidate, Neurodur, has been shown to be effective in animal models of epilepsy. The product combines a nerve cell-targeting molecule, taurine, with a common epilepsy therapy called valproic acid. On its own, valproic acid has been difficult to regulate as a therapeutic, Pursley said, though he added that Neurodur's advantage lies in its nerve cell-targeting properties that allow for improved dosing. The company has pegged the epilepsy candidate as an out-licensing opportunity.

Pursley also noted that both carnitine and taurine, the carriers for Myodur and Neurodur, are known compounds, as is leupeptin.

"Because they're known compounds, and because we know they don't denature each other when combined," he said, "the only new thing the FDA will look at is how much more efficacious they are combined. I don't think there will be any new safety issues."

Ceptor was founded by Alfred Stracher and Leo Kesner, both professors at the Downstate Medical Center in Brooklyn, N.Y. They will serve as outside advisers to Xechem, which was founded in 1994 by Ramesh Pandey, its chairman and CEO. Originally focused on taxol and a generic equivalent, it more recently shifted toward orphan drug development.

As a result, Xechem's pipeline includes an orphan drug candidate for sickle cell disease called Hemoxin (niprisan). The company is filing an investigational new drug application to begin Phase I trials of the drug in the coming year.

Hemoxin, a phyto-pharmaceutical product, is a drug cocktail composed of four botanical species indigenous to Nigeria and is being evaluated under a fast-track Phase I Small Business Innovation Research grant from the National Heart, Lung and Blood Institute, a unit of the National Institutes of Health in Bethesda, Md. In July 2002, Xechem acquired the drug's exclusive worldwide rights from the National Institute for Pharmaceutical Research and Developments in Nigeria. Xechem has 29 employees in Nigeria to produce the drug.

In Phase II studies conducted in that country, Hemoxin was safe in all patients and effective in about 80 percent. Such data were bolstered by findings published in the May 2003 issue of the British Journal of Hematology, in which researchers from the Children's Hospital of Philadelphia and the University of Pennsylvania demonstrated the drug's anti-sickling effects in transgenic mice. Phase III trials are under way in Nigeria, a country with 4 million sickle cell patients. Xechem hopes to launch the drug in Nigeria early in 2005.

Going forward, Pursley said Xechem also might look to acquire later-stage technology from which to develop orphan drugs. The company maintains a 14-person staff in New Jersey.

Its stock (OTCBB:XKEM) closed unchanged Tuesday at 16 cents.