National Editor

Cephalon Inc., the company widely known for its sleep-disorder drugs, is waking up to proteomics - and the need to backfill its pipeline - in an official way.

The company signed a five-year deal with MDS Proteomics Inc. with goals of quickening development of its compounds and expanding the indications for them, while getting the most out of West Chester, Pa.-based Cephalon's chemical library.

Marketed drugs include the flagship narcolepsy drug Provigil, Actiq for cancer pain, and Gabitril for epileptic seizures - and Cephalon is pushing for more.

William Tanner, analyst with Leerink Swann & Co. in Boston, said, "You've got good growth of Actiq and Gabitril, but if these guys can't assemble the technologies to allow them to accelerate their products, the face of the company really changes."

Robert Grupp, vice president of corporate communications for Cephalon, noted that the earliest a generic competitor for Provigil could reach the market is 2006, and "that's a worst-case scenario, if everything fails and our patents don't hold [up legally]."

Still, Tanner told BioWorld Today, Cephalon is wisely looking ahead.

"They have some drugs that are modifiers of intracellular signaling pathways, but you don't look at them as steeped in research and development," he acknowledged. "Rather than sitting around and waiting for the end to come [for Provigil], they're trying to get the requisite technologies," and the MDS deal is an effort in that direction, he said.

As part of the agreement, Cephalon bought a $30 million convertible note due in 2010, convertible into stock of MDS Proteomics (a subsidiary of MDS Inc.) at $22 per share, which is subject to adjustment if MDS Proteomics sells at a lower price.

"Essentially, it's a protective covenant for Cephalon because they're making an investment in a private company," said Frank Gleeson, president and CEO of Toronto-based MDS.

Cephalon, he said, has "built their business through very judicious in-licensing," as well as shrewd product development. The company got rights to Provigil (modafinil) through a deal with the French company Group Lafon, and paid $444 million for Salt Lake City-based Anesta Corp., which had Actiq (fentanyl). Cephalon paid Abbott Laboratories Inc., of Abbott Park, Ill., $100 million in November 2000 for ownership of Arbitral (tiagabine hydrochloride), which is marketed through an agreement with Abbott. (See BioWorld Today, Dec. 4, 2001; Nov. 2, 2000; and July 18, 2000.)

The deal between Cephalon and MDS is "going to be a long-term relationship, so there could be many opportunities," Gleeson said.

Cephalon, which will provide milestone payments and royalties to MDS, also aims to use the latter's differential analysis, chemiproteomics, phosphorylation fingerprinting and protein interaction mapping to get more out of its chemical library, and identify novel targets in central nervous system disorders.

"It's mostly for small molecules in the pipeline," Grupp told BioWorld Today. "We have an enormous library of compounds that are either proprietary or that we have access to through partnerships."

CNS disorders make up Cephalon's primary area of interest, Grupp said, but declined to specify a precise indication for which MDS technology might be most useful.

"There's probably not one we would identify publicly at this point," he said. "Ask me that question a year into this and it may be a different answer."

In December, Cephalon filed a supplemental new drug application seeking a broadened label that would include other sleep and wakefulness disorders for Provigil (See BioWorld Today, Dec. 26, 2002.)

"Like any biotech, Cephalon is eager to see a molecule from our own laboratory make it to market," Grupp said, pointing to the oral kinase apoptosis inhibitor CEP-1347 as the most likely. In August, Cephalon and H. Lundbeck A/S, of Copenhagen, Denmark, began a North American Phase II/III trial in early stage Parkinson's disease.

MDS, with multiple biotechnology and pharmaceutical partners deploying its proteomics-based methods, has candidate cancer targets of its own in preclinical stages. It also has a deal, which Gleeson called a "virtual joint venture," with Abgenix Inc., of Fremont, Calif., to market and develop antibodies. (See BioWorld Today, July 2, 2001.)

"We anticipate doing at least two to three more Cephalon-like relationships in the next 24 months," Gleeson told BioWorld Today, noting that the company already has "at least three embryonic relationships with tier-one pharma companies" and is working on others.

MDS Proteomic's parent is MDS Inc., a global company that provides laboratory testing, imaging agents for nuclear medicine, sterilization systems, cancer treatment research and development services, analytical instruments and medical supplies.

Cephalon's stock (NASDAQ:CEPH) closed Tuesday at $50.18, down $1.01. MDS Inc.'s stock (NYSE:MDZ) closed Tuesday at $14.72, up 2 cents.