West Coast Editor

DepoMed Inc.'s Phase III once-daily diabetes drug Metformin GR netted the company a sweet licensing deal with Biovail Corp., in which the latter is buying 2.4 million newly issued DepoMed shares - 15 percent of the outstanding common shares - for $12.3 million and agreeing to pay $25 million if and when the continuous-release drug wins approval by the FDA.

The new drug application yet to be filed requires a second pivotal Phase III trial, which will begin early in the third quarter, said John Hamilton, chief financial officer for Menlo Park, Calif.-based DepoMed.

"We will also be using a toxicology package study that Biovail has already completed," Hamilton told BioWorld Today.

The license gives Toronto-based Biovail, which gets no revenues from DepoMed as a result of the investment, the right to market Metformin GR in the U.S., Puerto Rico and Canada. Biovail, which will handle the regulatory filings, will pay DepoMed royalties.

Biovail will invest about $12.3 million to acquire 15 percent of the issued and outstanding shares of DepoMed, with an option for a specified period to buy 5 percent more and an option to buy another 5 percent over a three-year period. Both options are at predetermined prices. Further details were not disclosed.

DepoMed began Phase III trials on Metformin GR for Type II diabetes last summer, and expects to finish that study in the third or fourth quarter, filing an NDA in 2004. The drug uses DepoMed's gastric retention technology, which is designed for drugs absorbed high in the gastrointestinal tract. The GR system swells after it's ingested, staying in the stomach while releasing the drug. (See BioWorld Today, June 22, 2001.)

"The system' is simply a tablet, the size of a calcium pill or smaller," Hamilton said. "It's a mixture of the active drug and polymer, compressed into a tablet, and when it's exposed to gastric fluid, the water begins to enter that matrix and the polymers swell in response. The stomach thinks, Here's something the size of a piece of food. I need to keep it around long enough to break it down.'"

Water dissolves the active drug, which mixes with gastric fluid, and then the combination drains out through the pylorus, he said.

The active drug incorporated into DepoMed's gastric-release technology, in this case, metformin, was approved for use in Type II diabetes in 1994, alone or with sulfonylureas. It's indicated for cases that cannot be controlled by proper dietary management, exercise and weight reduction or when insulin therapy is not appropriate.

Metformin is marketed as once-per-day Glucophage XR by New York-based Bristol-Myers Squibb Co., against which DepoMed filed a patent-infringement lawsuit in March.

"It's our technology, and we have a responsibility to defend our intellectual property," Hamilton said. "The lawsuit will resolve itself in whatever manner it resolves itself. In the meantime, we've developed a different product."

Glucophage XR is the main competitor now, he added, but "we know that at least two other companies have programs in this area."

Bristol-Myers sold more than $2 billion of Glucophage products, Hamilton noted. "In February, generic competition entered the marketplace for the twice-a-day, immediate-release formulation [of Glucophage]," he said. "From what we've been able to tell, while the price on the IR formulation has dropped substantially, Bristol-Myers' other products have been relatively unscathed, primarily because they are superior products."

Metformin, Hamilton said, is a highly soluble drug and getting it to digest slowly is "a bit of a neat trick" that might be deployed with many other drugs. The GR technology also could be used for highly insoluble compounds, he added.

"We have what we call an erodeable' system," Hamilton said. "Instead of dissolving, it erodes." In both instances, once the drug is fully delivered, the polymers "just fall apart, become a watery gel and are safely eliminated," he said.

DepoMed's stock (AMEX:DMI) closed Wednesday at $4.35, up 15 cents. Biovail's shares (NYSE:BVF) ended the day at $33.30, down $1.30.