By Lisa Seachrist

Washington Editor

Insmed Pharmaceuticals granted an exclusive license to Taisho Pharmaceutical Co. Ltd. to develop and commercialize in Japan and other Asian countries the company's lead compound, INS-1, for the treatment of Type 2 diabetes and polycystic ovary syndrome (PCOS).

Under the terms of the agreement, Tokyo-based Taisho will pay Insmed license fees and milestone payments worth up to $32 million as well as royalties on product sales. In addition, Taisho has made a $3 million equity investment in Insmed and will fund 20 percent of the development costs for INS-1 in North America and Europe. Insmed retains all rights to INS-1 outside of Asia.

"We are very excited about the deal with Taisho," said Sophia Twaddell, spokeswoman for the Richmond, Va.-based Insmed. "Taisho is really making a play in Japan to make the switch from a company that produces over-the-counter products to an ethical [prescription] pharmaceutical company. We think they are very forward thinking."

INS-1 is a naturally occurring, oral insulin sensitizer. It is believed to be a component of a molecule that activates enzymes controlling glucose metabolism in people who are insulin resistant. Both Type 2 diabetes and PCOS are insulin-resistance disorders.

PCOS is the most common female endocrine disorder, affecting up to 6 percent of premenopausal women. It is the leading cause of anovulatory infertility in both the U.S. and Japan. Women suffering from this disorder are often overweight, have excess facial hair and suffer from menstrual irregularities. They have a significantly increased risk of developing Type 2 diabetes, coronary artery disease and endometrial cancer.

Insmed has two ongoing Phase II clinical trials of INS-1 in patients with PCOS. The first is a six-month trial to induce ovulation. The second is a three-month trial testing INS-1 in combination with the fertility drug clomiphene (a commonly used ovulation inducer).

The company also is conducting four Phase II trials of INS-1 in Type 2 diabetes.

"INS-1 is firmly in Phase II development," Twaddell said. "By the end of 2001 we plan to be in Phase III studies of the drug."

Twaddell said Insmed intends to find a marketing partner for INS-1 in the diabetes indication because it's such a large market, with more than 20 million people in the U.S. and Japan suffering from the disease. However, Insmed is looking to market INS-1 for PCOS independently.

"Insmed does not intend to be a royalty-driven company," Twaddell said. "Our intention is to develop our products as far as possible before finding marketing partners. The hope is, for PCOS, we will be able to market the product ourselves."

In addition to INS-1, Insmed is developing SomatoKine, a recombinant equivalent of insulin-like growth factor-1 (IGF-1) and its major binding protein, BP-3. That drug has potential as a hormone replacement therapy, stimulating the production of bone and muscle mass.

Insmed's stock (NASDAQ:INSM) closed Tuesday at $3.062, down 12.5 cents.

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