By Lisa Seachrist

Washington Editor

Dusa Pharmaceuticals Inc. signed a marketing and development deal with Schering AG for dermatology indications for its lead product, Levulan Photodynamic Therapy/Photodetection (PDT/PD).

Under the terms of the agreement, Schering will pay $30 million by the time the product has had its first commercial sale. In return, Berlin-based Schering will have exclusive marketing and distribution rights for Levulan in all dermatology indications in the U.S., Europe and the rest of the world (except Canada).

¿We are very excited about this collaboration,¿ said Geoffrey Shulman, president and CEO of Toronto-based Dusa. ¿This is a major deal for us. It will allow us to focus on non-dermatology indications for Levulan.¿

Levulan (aminolevulinic acid HCl) received an approvable letter from the FDA in late June as a treatment for multiple actinic lesions of the face and scalp. The company is expecting final marketing clearance from the agency within the next several months.

The collaboration calls for Schering to pay Dusa milestone and other payments totaling $23.75 million, plus an equity investment of $6.25 million. Those payments will be completed in stages between the signing of the deal and the first commercial sale of Levulan following regulatory approval. Dusa will receive a ¿substantial¿ royalty/product supply fee on sales of Levulan, Shulman said.

The agreement also calls for Schering to fund two-thirds of the research into other dermatology indications. As new dermatology indications are added, Dusa will receive milestone payments that function as prepaid royalties.

¿Schering has a strong dermatology business in Europe and Latin America,¿ said Joanne Marion, a spokeswoman for Berlex Laboratories Inc., a Schering affiliate in Wayne, N.J. ¿We were looking for entry into the U.S. dermatology market and were looking for unique partners to grow our U.S. sales. Dusa was particularly interesting to us.¿

Levulan Photodynamic Therapy is a combination of Dusa¿s 20 percent Levulan solution Kerastick applicator, and its Blu-U fluorescent tube illuminator. Levulan is preferentially taken up by fast growing cells and converted into protoporphyrin IX, a potent photosensitizer, which can then be activated by an appropriate light source.

Actinic keratoses (AK) are common sun-induced precancerous skin lesions that occur primarily in fair-skinned individuals. Current therapies include liquid nitrogen, which destroys healthy skin cells as well abnormal cells and can lead to scarring. 5-FU cream is another alternative, but it requires daily application for four to six weeks and can be painful and irritating. Levulan PT offers a less-painful alternative to these treatments.

Dusa and Schering are in the process of determining the additional dermatological indications for which Levulan will be developed. They potentially could include acne, psoriasis, superficial skin cancer, warts, and hair removal.

In addition to dermatological indications, Dusa is exploring Levulan as a detection aid for bladder cancer, a detection and treatment alternative for cervical intraepithelial neoplasia, a therapy for Barrett¿s esophagus and a means of preventing restenosis of blood vessels following angioplasty.

Dusa¿s stock (NASDAQ:DUSA) closed Tuesday at $16.812, down 56.2 cents.