Molecular Biosystems Inc. is getting up to $47.5 millionto extend a 1998 agreement relating to contrast agentswith the Mallinckrodt Group Inc.

The deal extends and broadens Mallinckrodt's exclusivityfor distribution of Albunex, an approved contrast agentfor ultrasound imaging, and FS609, an improved agentunder development. The sales and marketing exclusivitywas extended from October 1999 to July 2003 or threeyears after approval of FS609 for myocardial perfusion,whichever comes later.

Mallinckrodt, of St. Louis, is purchasing $13 million inMolecular Biosystems stock at $11.62 per share.Molecular Biosystems stock (NYSE:MB), which rose$2.25 on Thursday's announcement, fell 25 cents Fridayto close at $9.75 per share.

Mallinckrodt also will pay $20 million over four years tosupport development of FS609. In addition, San Diego-based Molecular Biosystems can get up to $14.5 millionin milestone payments.

"This absolutely guarantees that we will be able to bringour next-generation imaging agent to the market," saidStephen Keane, director, investor relations for MolecularBiosystems. "It's very significant for the company. It's areal validation of the technology."

Mallinckrodt, which had rights to the products in North,Central and South America, now also has rights inAustralia, New Zealand, parts of Asia and everywhereelse not covered by existing agreements. Shionogi & Co.Ltd., of Osaka, Japan, has rights in that country, andNorway-based Hafslund Nycomed AS has rights inEurope and the former Soviet Union, Africa and India.

Phase I studies of FS609 were completed in May. Theyshowed no significant adverse events, even at high doses,and resulted in visually apparent and significantmyocardial perfusion, or brightening, company officialssaid.

"FS609 is the major reason why we did this deal," saidCole Lannum, Mallinckrodt's director, investor relations."Albunex, the only approved ultrasound contrast imagingagent in the U.S., is not indicated for myocardialperfusion . . . a market that would be much larger thanthat for Albunex."

Albunex consists of air-filled albumin microspheres.They are injected into a vein and are used in ultrasoundimaging of the heart to enhance identification ofendocardial borders and to assess blood flow in thecardiac chambers.

Inert gas, rather than air, will be encapsulated in FS609,allowing it to stay intact longer. The length ofopacification, or diagnostic visualization, is 30 to 40seconds, Keane said. Phase I studies of FS069demonstrated diagnostic abilities of up to 13 minutes, hesaid.

"The new agreements demonstrate our companies'confidence in the significant market potential ofultrasound contrast," said Kenneth Widder, chairman andCEO of Molecular Biosystems. "With FS609, we hope totake the field of ultrasound contrast imaging to a muchhigher degree of clinical utility than we envisioned whenwe entered the field in 1987."

The $13 million equity investment will give MolecularBiosystems a current cash position of about $30 million.It's spending about $1.4 million per month, Keane said,and has about 13 million shares outstanding.Mallinckrodt's investment increased its stake inMolecular Biosystems from 3 percent to 10 percent.

Albunex was approved in August 1994 and launched lastOctober. U.S. sales for the quarter ending in June were$312,000. Molecular Biosystems gets a straight 40percent transfer payment on all sales, Keane said. n

-- Jim Shrine

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