PowderJect Pharmaceuticals plc entered an agreement to sell its drug business to AlgoRx Pharmaceuticals Inc., retaining a 15 percent equity stake valued at $10 million in the emerging pain-focused company.

In addition, Cranbury, N.J.-based AlgoRx secured a commitment of $25 million from three U.S. venture capital firms. The funding will be distributed over the coming months.

PowderJect, of Oxford, UK, now will focus exclusively on vaccines; the company has several approved in the United States and Europe and several being developed in its pipeline. In addition to the equity stake in privately held AlgoRx, PowderJect will receive royalties on any drugs AlgoRx develops using the PowderJect powder injection technology.

“We continue to pursue vaccines, and will need the PowderJect technology [for that],” said Rob Budge, director of corporate communications for PowderJect. He added that PowderJect changed its business model from being a technology provider to a product company, and now it will operate on a continuum ranging from research and development to commercialization.

The lead product in PowderJect’s drug business is PowderJect Lidocaine, a needle-free local anesthetic that is set to begin Phase III trials under AlgoRx shortly.

“The most important thing [about this agreement] is it really accelerates our stage of corporate development,” said Gordon Saul, chief business officer for AlgoRx. “It transforms us into a late-stage drug development company.”

The transaction allows AlgoRx to use the PowderJect technology outside the area of vaccines. AlgoRx also receives PowderJect’s Fremont, Calif., facilities, including its office space, research and development and manufacturing capabilities, plus its employees. AlgoRx will manufacture PowderJect Lidocaine in Fremont. Also, PowderJect will appoint a member to AlgoRx’s board.

“This gives us 35 folks and fills a number of hiring needs we may have had in the future,” Saul said, noting that the company now has six employees and will continue to maintain offices in Cranbury.

Prior to the transaction, AlgoRx had only ALGRX 4975, an in-licensed product that the company is developing to treat localized intractable pain. ALGRX 4975 is expected to enter clinical trials this year, Saul said.

AlgoRx now will develop PowderJect Lidocaine through registration with the FDA something Saul expects to take about two years.

The additional funding will enable the company to carry out the development plans. The money is expected to last two years, will help AlgoRx seek further in-licensing opportunities, and allow it to look at PowderJect, Saul said.

“The other thing it will allow us to do is continue to investigate the PowderJect technology platform for systemic protein delivery,” he said.

Since it was founded in March 2001, AlgoRx has raised $34 million. Ronald Burch and Richard Carter, in cooperation with InterWest Partners, of Menlo Park, Calif., founded the company.

In the Series B round, JPMorgan Partners and Sofinnova Ventures, both of San Francisco, joined InterWest Partners as investors.

PowderJect’s vaccine products are sold under its Evans Vaccines and SBL Vaccin brands, and its portfolio includes vaccines for influenza, yellow fever, travelers’ diarrhea, cholera, tuberculosis, polio and tetanus.