Two companies on opposite U.S. coasts celebrated Friday over a European commercialization deal for the FDA-approved skin infection drug Cubicin.

For Cubist Pharmaceuticals Inc., the deal could mean $50 million in up-front payments and potential milestones, as well as a significant double-digit royalty. For Chiron Corp., it means an expansion to its infectious disease portfolio and a significant market potential.

"We're very pleased with being able to complete this license agreement with Chiron - they are focused in the anti-infective space," said Michael Bonney, president and CEO of Lexington, Mass.-based Cubist. "This is an important addition to their business in Europe. We've structured an arrangement that allows us to preserve a fair amount of upside based on the significant royalty."

In addition to Western and Eastern Europe, Chiron gains development and marketing rights for Cubicin in Australia, New Zealand, India and certain Central American, South American and Middle Eastern countries.

"I think it's a good deal for us," said Chiron media relations manager, John Gallagher. "It certainly fits into our overall strategy. It fits very well with our focus on infectious disease. We have a strong global commercial operation, which we'll be able to leverage for marketing this product."

Chiron could pay Cubist up to $50 million, which includes $18 million up front. Of the up-front money, $10 million will be used to purchase Cubist common stock at a 50 percent premium. Chiron also would pay regulatory and sales milestones and the undisclosed tiered royalty.

The term of the agreement will be for the duration of the patent protection in the countries included in the deal, or until the year 2020, whichever is later.

Cubist acquired rights to Cubicin in 1997 from Indianapolis-based Eli Lilly and Co. It intends to market the product itself with a U.S. launch scheduled for November. Cubicin was FDA approved in September to treat infections caused by Gram-positive bacteria. (See BioWorld Today, Sept. 16, 2003.)

Cubist issued $8 million worth of common stock to Lilly in July in order to reduce Cubist's global royalty obligation to Lilly by 1 percent.

"We owe Lilly a royalty on sales as well," said Jennifer LaVin, executive director, corporate communications at Cubist. "The royalty we're getting from Chiron includes that. It still is a substantial royalty above and beyond what we need to pay Lilly."

"They are significant royalties," Bonney told BioWorld Today, "well north of what is standard for this type of deal."

The two companies intend to meet over the coming weeks in order to finalize a regulatory strategy. Gallagher said the current clinical safety package should be sufficient for European approval and that Chiron does not expect to conduct any more trials.

"We hope we may be able to file before the end of 2004," he told BioWorld Today.

For the U.S. market, Cubist set the price for Cubicin at 27 cents per milligram. Each vial is 500 mg. The cost would be $80.69 per day for an average person weighing 75 kilograms, or 165 pounds.

An analyst with W.R. Hambrecht + Co. in San Francisco told BioWorld Today last month that a conservative estimate for sales of Cubicin is $300 million at peak.

Cubicin, formerly known as Cidecin, is daptomycin for injection designed to fight complicated skin and skin-structure infections, including those caused by methicillin-resistant Staphylococcus aureus and methicillin-susceptible S. aureus. It will be used to treat surgical or wound infections that are life threatening or limb damaging.

The antibiotic also will complement Chiron's product portfolio, which includes TOBI tobramycin solution for inhalation to treat Pseudomonas aeruginosa, a Gram-negative bacteria, in patients with cystic fibrosis.

Cubicin has shown in clinical trials to have a low frequency of resistance. It also met the endpoint of demonstrating equivalency to either vancomycin or a semi-synthetic penicillin in the treatment of complicated skin and skin-structure infections.

Chiron is Cubist's second European partner for Cubicin. The first agreement was forged in January 1991 with Gilead Sciences Inc., of Foster City, Calif., which included a $13 million up-front payment to Cubist. That agreement was mutually terminated in September 2002 when the two companies could not agree on whether to pursue European approval in the single indication of skin and soft-tissue infections or for a broader label. (See BioWorld Today, Sept. 11, 2002.)

In addition to a Phase III trial of Cubicin in infective endocarditis and bacteremia caused by Staphylococcus aureus, Cubist is studying CAB-175 in a Phase I trial as a parenteral cephalosporin antibiotic. It also is investigating a version of ceftriaxone, a broad-spectrum cephalosporin antibiotic in the preclinical stage.

Cubist's stock (NASDAQ:CBST) rose 45 cents Friday to close at $11.25, while Chiron's stock (NASDAQ:CHIR) fell 10 cents to close at $53.83.