By Kim Coghill

Washington Editor

Quintiles Transnational Corp. reached an agreement with Discovery Laboratories Inc. to sell and market Discovery¿s Surfaxin, an orphan drug being developed for respiratory distress syndrome (RDS) in premature newborns and meconium aspiration syndrome (MAS) in full-term newborns.

Discovery, of Doylestown, Pa., expects to file a regulatory approval application for Surfaxin (lucinactant) immediately following completion of Phase III trials late next year, Robert Capetola, president and CEO of Discovery, told BioWorld Today. The pivotal Phase III RDS trial involves 1,500 premature babies, while the second Phase III, or supplemental trial, will look at 300 to 500 premature babies. Enrollment has started.

¿Our strategy from day one was to be a fully integrated biotech development and commercialization organization in the U.S.,¿ Capetola said. ¿This deal allows us to maintain our status as a fully integrated pharmaceutical company in the U.S. We do our own trials, we manufacture our own drug, and now we will have our own sales and commercial team.¿

Quintiles¿ subsidiary, Innovex Inc., will supply Discovery with a sales force (the number of personnel was not disclosed).

Under the financial part of the collaboration, Quintiles¿ investment group, PharmaBio Development Inc., will purchase $3 million of Discovery common equity at $3.79 per share and make available a line of credit of $8.5 million to $10 million to fund premarketing activities associated with the U.S. launch as Discovery achieves certain milestones.

PharmaBio will fund the sales and marketing costs for Surfaxin for seven years of product commercialization. PharmaBio also may make certain milestone payments that would be used to offset outstanding line of credit loans to Discovery. In return, PharmaBio will receive a commission on net sales over a 10-year period.

Furthermore, Discovery will provide PharmaBio with warrants covering about 350,000 shares of Discovery common stock at an exercise price of $3.48 per share. In addition, for each million dollars made available under the line of credit, PharmaBio will receive warrants to purchase about 38,000 shares of Discovery¿s common stock at an exercise price of $3.03 per share.

¿We like the notion of them providing a very niche-oriented sales and marketing program around neonatologists, especially with RDS,¿ Ron Wooten, president of PharmaBio Development Inc., told BioWorld Today. ¿We are trying to focus more and more on specialized sales and marketing programs.¿

The deal also includes provisions for future uses of Surfaxin, primarily acute respiratory distress syndrome (ARDS) in adults, currently in Phase II trials.

Although a treatment does exist for RDS, Capetola said there¿s nothing on the market for MAS or ARDS. And, he said, Surfaxin is the first humanized peptide-based synthetic surfactant that mimics protein B and is believed to be the only product in the world being developed for MAS.

¿This is a terrific deal for us because it allows us to partner with the single largest commercialization sales organization in the world,¿ Capetola said. ¿It gives us instant credibility as a potential commercial organization so that we can hit the ground running in terms of maximizing our launch and penetration in the U.S.¿

Surfaxin would be Discovery¿s first product on the market here and overseas. The company has partnered with Esteve SA, of Barcelona, Spain, for sales in southern Europe, but continues working on a deal in the rest of Europe.

Discovery, a five-year-old company, acquired the rights to Surfaxin from Johnson & Johnson, of New Brunswick, N.J., and The Scripps Institute, of La Jolla, Calif., in October 1996. In January 2000, Discovery stopped Phase I/II trials for acute respiratory distress syndrome because of manufacturing problems (See BioWorld Today, Jan. 28, 2000.)

Surfaxin also is under development for the treatment of asthma, chronic obstructive pulmonary disease, acute and chronic bronchitis and other pulmonary diseases.

RDS in premature infants is a breathing disorder in which the lungs of infants do not stay open due to an insufficient amount of surfactant, which is produced naturally as lungs mature. About 50,000 cases of RDS in premature infants occur in the U.S. annually.

MAS results when a full-term baby inhales meconium, a material produced in the intestine of a full-term baby before birth. About 26,000 cases of MAS occur each year.

In other business Tuesday, Quintiles said it entered a five-year strategic alliance with Pharmacia Corp., of Peapack, N.J., to provide clinical development and laboratory services to the company worldwide. The agreement expands the relationship globally that Quintiles and Pharmacia formed last year when Quintiles acquired Pharmacia¿s clinical development unit in Stockholm, Sweden.

Quintiles also has a commercialization deal with Scios Inc., of Sunnyvale, Calif., to commercialize Natrecor, Scios¿ product approved this year for acute congestive heart failure. (See BioWorld Today, Aug. 14, 2001, and Jan. 12, 2001.)

Discovery¿s stock (NASDAQ:DSCO) closed Tuesday at $3.25, up 28 cents, or 9.4 percent, while Quintiles (NASDAQ:QTRN) closed at $17.41, up 68 cents.