By Matthew Willett

In an acquisition that could total more than $65 million, Bio-Technology General Corp. (BTG) plans to acquire privately held Myelos Corp., a company whose technology focuses on the isolation of stimulatory peptides.

BTG, of Iselin, N.J., will make a $14 million cash payment and tender $21 million in equity, or about 2.3 million BTG shares, to the owners of Myelos.

An additional payment of $30 million in cash and stock rides on BTG's ability to submit for regulatory approval Myelos' lead compound, Prosaptide, for neuropathic pain associated with diabetic peripheral neuropathy. If the product is commercialized Myelos stockholders stand to make a 15 percent royalty on worldwide net sales in the third year after commercialization.

BTG CEO Sim Fass said the buy is in line with the company's past, present and future.

"Our last acquisition was eight years ago, and that brought us Oxandrin, which is now our lead product," Fass told BioWorld Today. "Oxandrin is experiencing a very rapid growth as a result of the co-marketing relationship with the Ross Products Division of Abbott Laboratories, and we're very enthusiastic about the Prosaptide addition. Our hope is that Prosaptide will prove to be a commercial and clinical success and eclipse in a significant way the current success of Oxandrin."

BTG in 1993 acquired Gynex Pharmaceuticals Inc., of Vernon Hills, Ill., and its Oxandrin product for $48 million. (See BioWorld Today, Aug. 9, 1993.)

Myelos, of San Diego, uses proprietary technology to isolate stimulatory peptides from growth factor and cytokine proteins. Its development efforts center on treatments for central nervous system disorders. It was founded in 1994 by John O'Brien, a professor of neuroscience at the University of California at San Diego.

Structuring the product acquisition over time is a boon for the company as well, Fass said.

"It's a good deal for us because we didn't have to put everything up front. Being able to milestone, or pay on a contingent basis, works very well for us," he said.

Myelos completed a Phase II trial of the compound in Type I and Type II diabetes mellitus demonstrating Prosaptide's ability to decrease pain associated with diabetic peripheral neuropathy.

And in preclinical studies Prosaptide showed the ability to not only alleviate diabetes-associated pain, but also to reverse the underlying neuropathy, inducing neuronal regeneration and preventing neuronal death.

Now, Fass said, BTG will embark on a clinical development journey for Prosaptide he hopes will be completed in 2005.

"We'll have to repeat the Phase II test to pin down the optimal dosing, and that should be completed by the end of next year," Fass said. "Then we'll go on to two Phase III pivotal trials that will take a couple of years, and we expect it could be approved in 2005. We have very high hopes and expectations."

Fass added that the 4 percent rise in shares, increasing the company's shares outstanding to 59 million, is only a small dilution.

BTG manufactures and markets genetically engineered products, including Oxandrin (oxandrolone, USP), an oral anabolic agent indicated as adjunctive therapy to promote weight gain following weight loss due to extensive surgery, chronic infection or severe trauma; and Delatestryl, an injectable testosterone replacement therapy for the treatment of conditions associated with a deficiency or absence of endogenous testosterone.

The company also markets Mircette, an oral contraceptive; Bio-Tropin, a recombinant human growth hormone indicated for the treatment of pituitary growth hormone deficiency in children; BioLon, a 1 percent solution of sodium hyaluronate used as a surgical aid to protect corneal endothelium during cataract extraction procedures, intraocular lens implantation, and anterior segment surgery; and Bio-Hep-B, a hepatitis B vaccine.

BTG's stock (NASDAQ:BTGC) rose 28.12 cents Thursday, closing at $7.812. n