By Charles Craig

Magainin Pharmaceuticals Inc. found a partner for its lead drug candidate, Cytolex, in SmithKline Beecham plc, which agreed to pay up to $32.5 million for North American marketing rights to the anti-infective product.

London-based SmithKline will pay Magainin, of Plymouth Meeting, Pa., $5 million up front and another $27.5 million based on achievement of development milestones, including successful completion * expected this quarter * of a second Phase III study of Cytolex.

Michael Doughtery, Magainin's chief financial officer, did not disclose the amount of that first milestone payment.

The drug initially is targeted for treatment of diabetic foot ulcer infections. In two Phase III trials the effectiveness of Cytolex, originally labeled MSI-78, is being tested against ofloxacin, the most widely used antibiotic for infections associated with diabetic foot ulcers.

In the first Phase III trial, Cytolex demonstrated it worked as well as ofloxacin without its adverse side effects. (See BioWorld Today, Sept. 27, 1996, p. 1.)

Ofloxacin is marketed under the brand name Floxin by Ortho-McNeil Pharmaceuticals Inc., of Raritan, N.J. The antibiotic typically is 70 percent to 95 percent effective in combating infections.

Magainin officials said more details from the first Phase III trial will be released with findings from the second study.

In addition to the cash payments from SmithKline, Magainin will supply Cytolex for commercialization and receive royalties on North American sales.

Magainin retains rights to Cytolex outside North America. Doughtery said the company may negotiate with SmithKline for an expansion of its marketing rights or may seek other partners.

Doughtery added that Magainin and SmithKline have agreed to split development costs if they decide to target other indications for Cytolex. SmithKline also received rights to negotiate licensing agreements for other Magainin drug candidates.

Following successful completion of the second Phase III trial of Cytolex, Magainin plans to file a new drug application with the FDA in the fourth quarter of 1997. Wall Street analysts have estimated Cytolex could generate annual revenues of about $170 million a few years after it reaches market.

Cytolex is an analog of the amino acid compound that protects African clawed frogs from a broad spectrum of infections. Magainin has made 2,000 derivatives of the natural antibiotic, which is believed to have activity against gram negative and gram positive infections as well as anaerobic and fungal organisms.

Magainin's stock (NASDAQ:MAGN) closed Thursday at $9.125, up $0.875. *