By Randall Osborne

Gearing up for Phase III studies on a schizophrenia drug that works without the severe side effects of traditional treatments, Titan Pharmaceuticals Inc. will collaborate with Novartis AG in a deal worth up to $38 million.

Titan, of South San Francisco, will receive an up-front payment of $18 million in license fees and reimbursement of research and development costs, plus a $5 million equity investment from Basel, Switzerland-based Novartis.

Novartis will make a milestone payment of $5 million to Titan when a new drug application (NDA) is submitted to the FDA or its European equivalent, and another milestone payment of $10 million upon approval of iloperidone, a small-molecule drug for which Novartis will fund the Phase III studies, probably by the end of this year.

"We think we'll be able to file an NDA toward the first half of 1999," said Louis Bucalo, president and CEO of Titan, which acquired an exclusive worldwide license to iloperidone from Hoechst Marion Roussel Inc., of Kansas City, Mo., in January.

Drug Blocks Serotonin, Dopamine

Iloperidone is one of a "newer generation" of antipsychotic agents, Bucalo said. "They're distinguished by their ability to improve positive and negative symptoms."

The positive symptoms of schizophrenia and psychosis are delusions and hallucinations. The negative symptoms are social withdrawal and apathy. Earlier drugs attacked the positive symptoms fairly well but did not affect the negative symptoms, and left patients unable to function in the world.

Even worse, the drugs often caused uncontrolled muscular movements, which sometimes were severe and debilitating for patients, Bucalo said.

Like other antipsychotic drugs, iloperidone functions by blocking the brain chemicals serotonin and dopamine. However, it blocks serotonin strongly and blocks dopamine rather weakly. Earlier types of antipsychotic drugs do just the opposite.

Since schizophrenia involves the overproduction of dopamine in one area of the brain and underproduction of it in another, Titan scientists theorized that using a weaker dopamine block would strike a balance of that chemical in the brain — thus ending the nasty side effects while handling the negative symptoms. In Phase II trials, they said it worked.

Titan, operational since 1993, went public last year. It focuses on developing drugs for central nervous system disorders and cancer. Five of its six cancer products, including CeaVac, an immunotherapeutic vaccine for colorectal cancer, are in the clinic, with a sixth planned to begin trials by the end of next year.

Titan's stock (NASDAQ:TTNP) closed Thursday at $6.188, up $0.560. *

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