With the intention of developing the approved drug Zenapax in other indications, Protein Design Labs Inc. restructured its commercial deal with Hoffmann-La Roche Inc. regaining exclusive worldwide rights in all indications other than organ transplantation.

The cost: $80 million, payable to Roche by the end of October.

PDL, of Fremont, Calif., intends to develop and hopes to someday market Zenapax (daclizumab) for multiple sclerosis, ulcerative colitis and possibly asthma.

"With this new agreement, we have created a means to continue Roche's commitment to the transplant community, at the same time providing a clearer path for PDL to expand uses of Zenapax in unmet or underserved medical markets," said PDL's CEO Mark McDade during a conference call Tuesday.

PDL now will be responsible for development, manufacturing, and sales and marketing of daclizumab in all indications other than transplantation.

As part of the agreement, Roche will continue to market Zenapax in transplantation indications until 2007. At that time, PDL could repurchase rights in those indications for an additional fee, estimated to be about $21 million, if Zenapax sales remain in line with 2003 figures. If PDL does not buy the transplantation rights, it would pay modest royalties to Nutley, N.J.-based Roche on sales in all diseases other than transplantation.

"Only if they retain transplantation is there a financial obligation back to them," McDade said.

The previous agreement between the companies included a 10.5 percent royalty rate to PDL to all sales of Zenapax in transplantation. With the new agreement, that rate rises to just below 20 percent. PDL's senior vice president and chief financial officer, Glen Sato, said PDL will receive royalties at the higher rate beginning today. Roche will continue to pay those royalties as long as it retains transplantation rights.

Zenapax, a humanized antibody that targets the interleukin-2 receptor on activated T cells, is approved in the U.S., Europe and several other countries for acute rejection in kidney transplantation.

The collaboration between the companies dates back to 1989 when Roche acquired worldwide commercialization rights to Zenapax, which was launched in 1997. The companies revised the agreement in October 1999, giving PDL worldwide rights to develop daclizumab in autoimmune diseases. Roche retained exclusive worldwide rights to Zenapax for non-autoimmune diseases, all commercialization rights, and it continued to market the drug for the prevention of kidney transplant rejection. (See BioWorld Today, Oct. 26, 1999.)

At the time of the revised agreement, PDL was entitled to 60 percent of all sales of Zenapax for autoimmune indications in the U.S. and Canada. With this week's restructured agreement, it is now entitled to 100 percent.

"We are very excited about being able to market and manufacture our first drug," Sato said, "and the transplant market could be addressed with either a partner or a small sales force, most likely the former."

With the reversion right to acquire the transplantation indication, McDade said, "We are now positioned to generate PDL product revenues by 2007, given the option to repurchase all rights and to begin marketing Zenapax directly. We are gaining a proven drug, a global brand and an assured launch platform for sales and marketing in the U.S."

The drug is in a Phase II trial in patients with moderate to severe ulcerative colitis. That trial is expected to be completed in the second half of 2004. Another Phase II trial of the drug in severe asthma is fully enrolled. Data from that trial are expected in the first quarter of 2004.

McDade said the timing of the restructuring benefited PDL because clinical data had not been released yet. "If we had exciting data at a later date, the price tag would have been higher," he said.

PDL also is looking to develop Zenapax for multiple sclerosis. The company's senior vice president and chief medical officer, Steve Benner, cited two studies done at the National Institutes of Health and at the University of Utah involving about 30 patients in which daclizumab demonstrated significant activity and symptom improvement in multiple sclerosis.

"We certainly find the data extremely encouraging," Benner said, adding that the company intends to conduct its own, more formal trial in the near future. He expects a Phase II trial could begin in the first half of 2004 in relapsing-remitting multiple sclerosis.

Said McDade: "It's a goal to enter into an MS partnership by the end of this year. And there's discussions with more than one partner."

At the end of the second quarter, PDL had $580 million in the bank. That figure will dip to $500 million, half of which is long-term debt, once the restructured agreement is completed.

PDL's stock (NASDAQ:PDLI) closed unchanged Tuesday at $14.05.