By Karen Pihl-Carey

OSI Pharmaceuticals Inc. formed a partnership with Tanabe Seiyaku Co. Ltd. to develop small-molecule drugs to treat Type II diabetes.

A successful product could result in more than $30 million in milestone payments and success fees, as well as royalties, for OSI for each target in the program, all aimed at treating non-insulin dependent diabetes mellitus, or Type 2 diabetes.

OSI, of Uniondale, N.Y., also will receive an up-front fee of "several million" dollars, as well as support for the four-year funded research program, chief financial officer Bob Van Nostrand said.

"This collaboration right now is focused on diabetes," Van Nostrand told BioWorld Today. "We would like to do other things. There will be other targets that could come into the program. But the initial ones are looking at the elevation of glucose levels."

With the collaboration, Osaka, Japan-based Tanabe receives exclusive worldwide marketing rights and the responsibility for full clinical development.

The partnership is built on a drug discovery alliance between OSI and the Vanderbilt University Diabetes Center in Nashville, Tenn. The alliance, which was formed in April 1998, focused on four novel targets, including Hexokinase II and other gene expression targets.

"We have been working with them since 1998 to establish targets, and it was based on that that we were able to do this deal with Tanabe," Van Nostrand said. "There are no leads at this point," but the company has begun screening compounds, using libraries of compounds from both Tanabe and OSI.

OSI was working with Wyeth-Ayerst Laboratories, of Radnor, Pa., on the same type of project, giving Wyeth-Ayerst exclusive worldwide licensing rights, but that agreement expired in 1998. The agreement with Tanabe replaces it, Van Nostrand said.

Type II diabetes affects more than 128 million people worldwide and usually develops in adults older than 40. In Type II diabetes, the pancreas continues to produce insulin, but the body cannot use it to effectively regulate blood sugar levels. Glucose builds up in the blood and causes multiple secondary pathologies.

The research targets of the OSI and Tanabe partnership will focus on normalization of the elevated plasma glucose levels. Clinical studies have shown that tight regulation of glucose levels reduces complications associated with diabetes, OSI said.

Vanderbilt University Diabetes Center is studying the mechanisms of insulin and other hormones that affect glucose homeostasis, as well as pathophysiology and complications of diabetes in humans. Tanabe is a pharmaceutical company with a strength in the cardiovascular field. Its leading drug is Cardizem (diltiazem), a product of Hoechst Marion Roussel AG, of Frankfurt, Germany. Cardizem is a calcium antagonist sold in more than 100 countries.

Van Nostrand said the new partnership is "an interesting model," bringing together Tanabe's experience with development and marketing, Vanderbilt's research abilities and OSI's focus on drug discovery. Tanabe was chosen as the partner because the company had expressed an interest in OSI and had planned to do a diabetes program itself, Van Nostrand said.

OSI is involved in long-term research alliances with several other companies. It has a research and development agreement with Bayer Corp., of Pittsburgh, on cancer diagnostic tests, and a five-year research and development agreement with Pfizer Inc., of New York, on cancer therapeutics that target oncogenes and tumor suppressor genes. The company also is working with Sankyo Co. Ltd., of Tokyo, on an anti-infectant, and with Hoechst Marion Roussel on gene transcription-based drugs to treat certain inflammatory diseases, viral infections, metabolic diseases and cardiovascular diseases. OSI also has a research and development agreement with Novartis AG, of Basel, Switzerland, for TGF-beta 3 for treatment of chronic skin wounds.

Last month OSI acquired for $1.5 million the drug-discovery programs focused on G-protein-coupled receptors from Cadus Pharmaceuticals Corp., of Tarrytown, N.Y., and with it came a collaboration with Solvay Group, of Brussels, Belgium.

OSI's stock (NASDAQ:OSIP) closed Wednesday at $5.875, up 25 cents.