Product development, licensing deals, stock purchases and court settlements are all part of a multifaceted deal struck between Enzon Inc. and Inhale Therapeutic Systems Inc. that spans a variety of issues and technologies.

“This is a unique situation where two companies recognized the complementary nature of their business models and crafted an alliance that truly benefits both parties,” Inhale Chairman Robert Chess said in a conference call. “We believe the alliance will have several benefits for Inhale and for the industry as a whole.”

The companies will jointly develop three products to be specified over time based on Inhale’s Inhance pulmonary delivery platform and SEDS supercritical fluids platform, focusing on developing oncology products. Enzon will be responsible for the commercialization and clinical development while Inhale will develop and manufacture resulting products.

“We hope the first collaborative program will be in the clinic within the next 12 months,” Enzon President and CEO Arthur Higgins said in another conference call.

The deal involves several other technology areas as well.

Inhale will license Piscataway, N.J.-based Enzon’s 40-plus U.S. PEG, or PEGylation, patents to third parties. Inhale also will have the option to license Enzon’s PEG patents for use in Inhale’s products. Enzon will receive a royalty or a share of profits on final product sales of any products that use its PEG technology, including branched PEG.

Enzon retains the right to use its PEG technology for its own products and those it may develop with co-commercialization partners. Inhale will market PEG services and Enzon and Inhale PEG technology to third parties.

“[The deal] will consolidate the leading PEGylation technology into a single source for biopharmaceutical partners,” Chess said. “Through this alliance, we will be able to offer third parties Enzon’s pioneering PEGylation technology.”

“We see a great benefit to Inhale being able to offer a full package of PEG solutions to its drug delivery customers,” Higgins said. “This can only further serve to accelerate the acceptance of PEGylation as the industry standard for improving the efficacy, safety and convenience of injectable drugs that suffer from delivery limitations.”

Enzon will have the option to license San Carlos, Calif.-based Inhale’s PEGylation patents for Enzon products and Inhale will receive royalties on any such products, but specifics on the royalties were not disclosed. Enzon will have the ability to request PEGylation supply and services from Inhale. The terms in the product collaboration and PEG licensing agreements are subject to exclusions of certain drug molecules.

Enzon and Inhale will explore the development of noninvasive delivery of single-chain antibody (SCA) products via the pulmonary route. SCAs are genetically engineered proteins designed to expand on the therapeutic and diagnostic applications possible with monoclonal antibodies. Inhale will become the exclusive pulmonary technology provider for Enzon’s single-chain antibody technology using the Inhance pulmonary drug delivery technology for at least three years, assuming success in the initial proof-of-concept program. Enzon retains all rights to its SCA products while Inhale retains all rights to its technology.

“With the SCA collaboration with Inhale specific to development of inhaled antibodies, we believe single-chain antibodies can play a very important role in expanding the utility of antibody therapy,” Higgins said.

In a present day part of the deal, Enzon will purchase $40 million of newly issued Inhale convertible preferred stock. The conversion price was set at $22.79, based on a 25 percent premium to the average Inhale common stock closing bid price over the past 20 trading days. If Inhale’s common stock price three years from the date of issuance, or earlier in certain circumstances, drops below $22.79, the conversion price will be adjusted down, but never lower than $18.23. Conversion of the preferred stock into common can occur anywhere from one to four years following issuance.

“Our investment signifies our belief that Inhale is well positioned to become a leader in purveying drug delivery solutions for the biotechnology and pharmaceutical industries,” Higgins said.

And closing the books on a recent court proceeding, Enzon and Inhale will settle the patent infringement litigation filed by Enzon against Inhale’s Huntsville, Ala.-based Shearwater subsidiary. The suit, filed in 1998, related to Enzon’s branched PEG technology. Inhale will receive licensing access to the contested patents under a cross-license agreement.

Inhale officials said they had more than 20 families of PEGs available to partners and added more than 40 additional ones through the alliance.

Enzon will receive a one-time payment of $3 million from Inhale to cover expenses incurred in connection with defending the branched PEG patents that both companies will commercially exploit.

“Through this alliance with Inhale, we have strengthened our already-strong technology base as we now have the ability to include Inhale’s pulmonary and supercritical fluids platform into our own product development options,” Higgins said.

Enzon’s stock (NASDAQ:ENZN) gained 51 cents Tuesday to close at $54.59. Inhale’s stock (NASDAQ:INHL) gained 45 cents to close at $17.94.