Cellegy Pharmaceuticals Inc. struck a marketing deal worth at least $25 million for its Tostrex Gel product, currently under FDA review.

Cellegy and PDI Inc. entered into an exclusive license agreement to commercialize the product in North America. Cellegy initially received $15 million, and will receive a $10 million milestone payment contingent on FDA approval of Tostrex Gel, for which a new drug application was submitted in June. PDI also will make royalty payments on net sales, ranging from 20 percent to 30 percent. Cellegy will supply the product through its contract manufacturer, though it will be reimbursed for manufacturing costs.

"Financially, the up-front part of this deal is very important," Cellegy Chief Financial Officer Richard Juelis told BioWorld Today.

The South San Francisco-based company reported about $5.5 million in cash and investments in its most recent quarterly filing, for the period ended Sept. 30, to which it added $5.5 million through a private placement in the beginning of November.

"With this deal, we'll finish the year with about $23 million in cash," Juelis added. "With a relatively lower burn rate in the neighborhood of $900,000 per month, which will continue for the near term, that certainly moves us from about a year's worth of cash to arguably well over two years. And because we're out-licensing the product, we have very few remaining expenses for Tostrex."

Following FDA approval, Cellegy and Upper Saddle River, N.J.-based PDI said they would launch the transdermal testosterone gel product to treat male hypogonadism as soon as practical. A 204-patient trial showed that the drug restored normal blood levels in 90 percent of patients.

"We demonstrated very good efficacy results, the endpoint being below-normal levels of testosterone," Juelis said. "We're guardedly confident that we'll get approval. There's nothing we're aware of that would be a problem."

The 10-month Prescription Drug User Fee Act date for Tostrex gel is April 3. If approved, Tostrex would compete in a market that includes another gel as well as products delivered by patch and injection.

"The market, which was for a long time $50 million to $100 million in sales in the U.S., expanded with the gel selling at a rate of close to $200 million to between $250 million and $300 million," Juelis said. "It's an expanding market, and clearly the superior product form seems to be the gel. But we need to differentiate ourselves and get exposure to our product."

He said Tostrex Gel would be packaged in a metered dosing system, allowing doctors to titrate specific doses tailored for each patient. Cellegy also believes its marketing partner brings to the table a set of tools to deliver added exposure. PDI will be responsible for the marketing and sales of Tostrex, taking advantage of an existing sales and marketing infrastructure within the larger PDI Pharmaceutical Products Group.

The agreement will last for the duration of the product's commercial life.

The funding provides Cellegy the opportunity to continue development of Tostrelle Gel, the female equivalent of Tostrex. Tostrelle, a transdermal testosterone gel to treat female sexual dysfunction due to testosterone deficiency, entered Phase II/III testing early last year.

"It's generating an awful lot of interest from both the medical community and potential partners," Juelis said, adding that no data were available from the 120-patient blinded trial. "Now that we've gotten the Tostrex deal done, we're looking at either a partnership for Tostrelle, or with the additional cash moving it more rapidly through clinical trials."

He said there are no equivalent gel products on the market for women.

Elsewhere at Cellegy, the company continues development of Cellegesic, a drug for which its NDA was withdrawn in April. The FDA advised that approval was unlikely, causing the company's stock to plummet more than 50 percent on the day the news was released.

The NDA withdrawal was based on several issues, a significant one being the amount of anal fissure pain reduction patients received vs. the headaches some experienced. About 50 percent of patients developed headaches, though only 5 percent dropped out of the trial. (See BioWorld Today, April 29, 2002.)

But following a series of meetings with the agency, Cellegy said it would begin another Phase III trial in an attempt to obtain approval for the nitroglycerin ointment. (See BioWorld Today, Sept. 10, 2002.)

Juelis said no trial has begun, but the company and the agency are nearing agreement on final protocol and design.

A similar Cellegy product to treat anal fissures, Rectogesic nitroglycerin ointment, last month received South Korean regulatory approval. It has been on the market in Australia since early 1999, and also will be available in New Zealand during this quarter. Cellegy said that Rectogesic ointment is undergoing regulatory review in a number of additional markets in the Pacific Rim.

Other pipeline products include nitric oxide donors for the treatment of Raynaud's disease and prostate cancer, as well as products to treat male erectile dysfunction.

Cellegy's stock (NASDAQ:CLGY) on Thursday closed up 43 cents, or 10.6 percent, at $4.48. PDI's stock (NASDAQ:PDII) closed at $12.20, up $1.41, or 13.1 percent.