Theratechnologies Inc. entered into a licensing agreement with Sakai Chemical Industry Ltd. for the development and marketing in Japan of Theratechnologies’ ThGRF peptide, or TH 9507, in a deal valued at US$36 million.

Although the initial indication will be for hip fractures, the agreement with Theratechnologies, of Montreal, also gives Sakai, of Tokyo, the option to develop the growth hormone-releasing factor analogue in chronic obstructive pulmonary disease, sleep disorders and immune dysfunction, as well as other indications that Theratechnologies may target in the future.

“For us, it means a lot,” said Luc Tanguay, president and chief operating and financial officer of Theratechnologies. “It’s the first agreement we have with our lead product.”

Tanguay also said it is a good deal for Theratechnologies because of the economics of the collaboration, the advantages of having a partner familiar with the regulatory process in Japan, the fact that it is among the largest biopharmaceutical deals between Canadian and Japanese companies, and that Japan makes up about 16 percent of the world pharmaceutical market.

In addition to up-front payments and milestones, Theratechnologies will receive double-digit royalties and performance milestones based on future sales. Sakai will be responsible for all development costs and regulatory approvals in Japan, while Theratechnologies will provide the active ingredient to Sakai for clinical trials and, later, commercialization.

The $36 million potential assumes four products are brought to market. Specific terms were not disclosed.

In November, Theratechnologies entered an agreement with Bachem Ltd., of Bubendorf, Switzerland, to develop a large-scale manufacturing process for the peptide, which Tanguay said is a difficult process.

Tanguay noted that the company also wanted to do this kind of deal while approaching the end of Phase II trials of the peptide.

“We didn’t want to do it too early in Phase I and not have a good economic deal,” he said.

ThGRF is in four Phase II trials, including ones for anabolic effect in hip fracture, anabolic effect in chronic obstructive pulmonary disease (COPD), as well as regarding immune response in those 70 and older who are receiving a flu vaccine. There also is a Phase IIb study in sleep maintenance, for which Theratechnologies expects to have the results at the end of this quarter or the second quarter. The immune response study results are expected next, with results in the second quarter or third quarter, followed by the hip fracture study, expected to be completed in the third quarter or early fourth quarter. The COPD study is targeted for completion by the end of the year.

The FDA also has cleared Theratechnologies to launch a Phase II safety trial in patients with controlled Type II diabetes.

Some of the information developed in Theratechnologies’ trials will be shared with Sakai in its clinical development program for TH 9507 in Japan, Tanguay said.

In May, Theratechnologies entered into an agreement with ALZA Corp., of Mountain View, Calif., to use ALZA’s Macroflux skin interface technology to develop a new delivery system for TH 9507. That product, which includes a patch with a very small needle, should be in clinical trials by year’s end, Tanguay said. Currently, the peptide is delivered by injection, which is not always convenient, he said.

The agreement with Sakai is just the beginning of Theratechnologies’ overall plan to partner with other companies, however.

“We’re in discussions with other potential partners in other areas of the world,” Tanguay said.

Theratechnologies’ stock (TSE:TH) gained C62 cents Tuesday to close at C$12.30.