MGI Pharma Inc. plans to pay at least $22.5 million to expand its Aloxi franchise.

The Minneapolis-based company, which already markets an injectable version of the product in the U.S. and Canada for the prevention of chemotherapy-induced nausea and vomiting (CINV), secured U.S. and Canadian rights to an oral formulation and additional rights to the injectable version for post-operative nausea and vomiting (PONV).

MGI gained the exclusive licenses to Aloxi (palonosetron hydrochloride) from Helsinn Healthcare SA, which could receive added milestone payments totaling $25 million over the next several years. The Lugano, Switzerland-based company also would receive royalties on net sales and supply fees.

"This really is a case showing that line extensions tend to be higher return opportunities than most drug development," MGI Chief Financial Officer William Brown told BioWorld Today. "So this gives us an opportunity to really solidify and expand our franchise with Aloxi, and make sure that MGI is the party that controls the molecule in the U.S. and Canada."

The companies signed their original agreement in April 2001, when MGI paid about $38 million for U.S. and Canadian marketing rights to the drug's CINV indication. At that time, Brown said MGI and Helsinn agreed to explore additional rights in the future.

"The time simply became right after the approval of Aloxi for CINV for us to pick up on those conversations," he said. "The commercial economics for the expanded rights are the same as they were in the original agreement."

MGI previously disclosed that Helsinn would receive about one-third of sales revenue for royalties.

If approved for the prevention of PONV, Aloxi would compete in a U.S. market valued at about $400 million. Helsinn, which will continue to fund and conduct all development of Aloxi, plans to begin pivotal trials for PONV and the CINV oral formulation early next year. Brown said the protocols' design remain an ongoing process.

MGI said it expects the PONV and oral Aloxi products to add more than $100 million of annual sales. The product, which was approved this summer, is expected to generate $250 million in annual CINV sales four years after its launch. The company's first-year sales guidance totals $50 million to $55 million, which includes about $5 million already booked following initial stocking.

Aloxi is the only 5-HT3 receptor antagonist indicated for the prevention of CINV caused by moderately emetogenic cancer chemotherapy. Three Phase III trials demonstrated its safety and efficacy compared to currently marketed 5-HT3 receptor antagonists for prevention of CINV. (See BioWorld Today, July 29, 2003.)

Shortly after product approval, MGI raised net proceeds of about $168.6 million through a common stock offering. (See BioWorld Today, Aug. 11, 2003.)

Deeper in its pipeline, MGI is developing a cytotoxic agent called irofulven (hydroxymethylacylfulvene) for various solid tumors. In Phase I monotherapy trials, it has shown activity against ovarian, liver and prostate cancers. Phase II combination therapy trials are studying its use for gastric, liver and colon cancer. In addition, the company is conducting earlier stage work with a molecule that targets DNA methyltransferase.

MGI's stock (NASDAQ:MOGN) fell 52 cents Monday to close at $36.16.