By Kim Coghill

Washington Editor

Maxia Pharmaceuticals Inc. entered a multiyear collaboration with two Johnson & Johnson companies to discover and develop insulin sensitizers for the treatment of Type II diabetes and related metabolic disorders.

Financial terms of Maxia's deal with San Diego-based The R.W. Johnson Pharmaceutical Research Institute (PRI) and Raritan, N.J.-based Ortho-McNeil Pharmaceutical Inc. (OMP) were not released. However, Maxia, a private company based in San Diego, said it would receive an up-front payment, research and development funding, milestone payments, royalties on product sales and equity investments.

"This is a very substantial deal," said Magnus Pfahl, Maxia's president and CEO. "The precommercialization payments could be much more than we have raised in any financing round - actually several times as much."

In May, Maxia raised $20.5 million through the sale of Series B preferred stock and convertible debt. It raised less in its Series A round in 1997.

Through the collaboration, PRI and OMP have obtained rights to Maxia's technology and compounds in the field. The company is developing nuclear receptor ligands that modulate the expression of genes involved in the regulation of blood sugar and lipid metabolism. Maxia and PRI will jointly direct the research and preclinical development, and PRI will have responsibility for subsequent development and will receive exclusive worldwide rights to any resulting products.

Pfahl said the research will focus on compounds based on the MX6000 series. In preclinical development, MX6054, a novel small-molecule insulin sensitizer for the treatment of Type II diabetes, demonstrated positive results. The product improved key indicators of Type II diabetes by providing significant reductions in serum glucose and triglycerides, and improved insulin sensitivity.

"Our overall goal, of course, is to provide new medicines for this important disease," Pfahl said. "Today's drugs cannot effectively treat the disease for a long time. What we are aiming to achieve is a new kind of drug that is effective in treating the disease. The important thing about these types of drugs is that sensitizers in general can reverse the disease picture back to the normal state, in that we reverse instant resistance back to instant sensitivity."

But oftentimes, Pfahl said, diabetes patients experience other problems such as both elevated triglyceron and cholesterol levels. "In this new drug, we think we can address this, particularly the high cholesterol levels," he said.

Pfahl said the collaboration will run between two and four years, and optimistically, it will take about six years to develop a product.

Maxia was formed in 1995 and focuses on treatment of Type II diabetes/dyslipidemia, cervical dysplasia and cancer. The company also has leads for the treatment of certain inflammatory diseases and cardiovascular disease.

In mid-October, Maxia entered a collaboration agreement with Discovery Partners International Inc., also of San Diego, to design and synthesize compounds useful to Maxia's research and development. Under that agreement, Maxia retains exclusive rights to develop and commercialize resultant compounds.

Proceeds from the Series B financing were earmarked to complete development of MX6, a product in Phase II/III studies for treatment of all grades of cervical intraepithelial neoplasia, also called cervical dysplasia, a precancerous condition.