LONDON - PowderJect Pharmaceuticals plc has agreed to a US$100 million collaborative deal with Geneva, Switzerland-based Ares-Serono Group, which will develop five therapeutic proteins for delivery via PowderJect's dry-powder needle-free injection system. At the same time, PowderJect, of Oxford, U.K., announced a rights issue to raise #52 million (US$84.9 million) for the in-house development of needle-free delivery of conventional vaccines.

PowderJect's chairman and CEO, Paul Drayson, told BioWorld International the deal will push PowderJect's market capitalization through the US$1 billion barrier. "This is a critical point," he said. "Investors can see there is long-term value and potential."

The companies did not disclose which proteins are involved, but the proteins are in the fields of reproductive health and immunology, and most are already on the market, administered by injection.

"This deal with Ares-Serono is very important, because it is our first multi-product collaboration in the drugs business," Drayson said, adding that the collaboration "nicely balances our portfolio with our programs in DNA and conventional vaccines."

Under the deal with Ares-Serono, the Swiss company will make a US$10 million equity investment in PowderJect, at #6.85 per share. This price represents a premium of 20 percent over the average closing price for the 30 business days prior to Jan. 28, when the deal was agreed upon. The stock price had risen to #7.07 by the middle of last week, and jumped by #1.63 to #8.70 when the deal was announced Feb. 11. Before the placing, Ares-Serono will hold 1.4 percent of PowderJect. In addition, Ares-Serono will make an up-front payment of US$1.1 million, fund research and development and clinical trials, and pay PowderJect additional license fees and development milestones. If all milestones are achieved, total payments before commercialization will amount to US$90 million, over a period of not less than three years.

Following commercialization, PowderJect will receive royalties, and will be responsible for the manufacture and supply of devices under normal commercial terms.

PowderJect said that following receipt of the up-front and equity payment, it will have a cash balance of #32 million, sufficient to fund the current pipeline of drug and DNA vaccine products through to commercialization. The company has a collaboration on DNA vaccines with Glaxo Wellcome plc, of London.

Although PowderJect has no experience with the proteins involved, Drayson said the company has a broad base of proprietary technology for formulating powders. "We know we can reformulate compounds for powder injection from small-molecular-weight compounds to genes of up to 128 kilobases," he said.

The proceeds of the placement and open offer, at #6.70 per share, will be used to fund the development of three conventional vaccines that are already on the market for influenza; an adult hepatitis B booster; and an adult diphtheria/tetanus combination booster. The issue is fully underwritten by Robert Fleming and Co., of London. WestLB Panmure Ltd., also of London, is the broker for the issuance.

The company said it has done preclinical research over the past 12 months, reformulating six major types of conventional vaccines into powders, which have been successfully delivered by the PowderJect system. In most cases, the performance of the vaccines has been enhanced by delivery with the system, which accelerates the particles to supersonic speed with a burst of helium gas, forcing them painlessly through the skin. Because of the stronger immune response elicited, the dose of vaccine required is only 10 percent of that required with needle syringe administration. Furthermore, the powdered vaccines are stable at room temperature, avoiding the problems of refrigeration and spoilage encountered with conventional vaccines.

PowderJect believes it will enhance shareholder value if it raises money to take these conventional vaccines into Phase II before seeking a partner, rather than licensing them at this stage. It has identified the adult vaccine market as having the greatest commercial potential and lowest development risk, because the vaccines have known correlates of protection. The preclinical studies have demonstrated greater efficacy with the PowderJect method of administration, and the vaccines already have substantial markets, with an opportunity for premium, branded products.

"These vaccines will all be off-patent by the time we get them to market," Drayson said. "The added performance PowderJect gives, combined with the convenience and safety of needless injections, will allow us to compete with new types of vaccines coming through and pick off the highest value element of the market."

In influenza, PowderJect's preclinical tests showed a stronger antibody response and better protection. The company said the Phase I and Phase II studies could be completed within four years, with product filing within six years if a partner is found to bear the costs of the complex Phase III trials.

Similarly, hepatitis B and the diphtheria/tetanus vaccines showed higher rates of seroconversion when administered by PowderJect, and the company expects to file for registration of both products in four years.

The direct cost of each of the three programs is estimated at #10 million.