Armed with positive trial data generated since the companies formed their deal two years ago, Cypress Bioscience Inc. modified its milnacipran agreement with Pierre Fabre Medicament SA.

Signed in August 2001, the initial deal gave Cypress an exclusive license to develop and sell any product with milnacipran as an active ingredient for the treatment of fibromyalgia syndrome (FMS) and related chronic pain syndromes in the U.S. and Canada. That agreement, which included an up-front payment to Pierre Fabre and potential milestone payments and royalties, also gave Cypress an option to expand the license to include other indications.

The companies have dealt with that option. Cypress, of San Diego, now has an exclusive license to develop and sell any milnacipran product for all indications in the U.S. and Canada. Pierre Fabre, of Paris, will continue to have the right to manufacture raw material needed for milnacipran products, said Sabrina Johnson, chief financial officer at Cypress, adding that the new deal improves the economics for Cypress regarding the purchase of the milnacipran active ingredient.

In return for the changed guidelines, Pierre Fabre receives 1 million shares of Cypress stock and a warrant to purchase another 300,000 shares. Based on Friday's closing price of $4.16, the shares are worth about $4.16 million.

Cypress' stock (NASDAQ:CYPB) rose 52 cents Monday, or 12.5 percent, to close at $4.68.

"When we did the deal, the economics were good, but the field was limited to fibromyalgia syndrome and related conditions," Johnson told BioWorld Today. "The economic terms reflected that targeted indication. Since then, some things have changed. We completed the Phase II trial in FMS and we saw some of the secondary symptoms can be treated [with the same compound]. It became evident we needed to revisit the agreement."

Although specific terms were not available, Johnson said the agreement "significantly improves" the terms of the transfer fee associated with the milnacipran active ingredient.

Since the deal began, Cypress has progressed milnacipran through Phase II FMS trials and now is eyeing pivotal work. Johnson said the company is "in the midst" of finalizing the trial protocol with the FDA and it hopes to begin the program in the fourth quarter. And while it is seeking a partner for the drug, "it is not absolutely necessary that we have one before we begin the trials," she said, adding that "the real partner need is for commercialization."

Milnacipran is a norepinephrine serotonin reuptake inhibitor that has been approved to treat depression in 22 countries. The Phase II FMS study showed it provided a statistically significant improvement in pain and secondary symptoms that included fatigue and mood. The disease is a musculoskeletal pain and fatigue disorder that causes pain in the muscles, ligaments and tendons. Cypress believes the drug has applications in other areas as well.

"We are planning to start pilot studies in some of these other conditions," Johnson said. "The first area is irritable bowel syndrome - we hope to start that before the end of the year."

The other area has not yet been decided, but Cypress hopes to have both pilot studies under way by the end of 2004.

At the end of March, Cypress closed a private placement, raising about $10.3 million for the upcoming Phase III work. The company has about $19 million in cash now, Johnson said, which should last through 2004, if not longer. While she allowed that before the end of the two planned Phase III trials, Cypress would need funds, she said a move in that direction would factor in any partnering deals and "will be based on timing."

Anything behind milnacipran is just that - in the background.

"We're always looking for new product opportunities and we have a few we might act on, but our focus right now is to get milnacipran squared away and get that Phase III started," she said.