Oclassen Pharmaceuticals Inc. announced Thursday a licensingagreement by which Eli Lilly and Co. will market Oclassen'sfialuridine (FIAU) anti-viral compound against hepatitis B virus(HBV) in overseas markets and co-promote it in the UnitedStates.

Lilly of Indianapolis also agreed to make a $7.5 million equityinvestment in Oclassen to pay all costs of developing FIAU formarkets worldwide and pay Oclassen milestone payments androyalties on future sales of FIAU.

"In the clinical trials conducted by Oclassen, low oral doses ofFIAU produced a rapid and prolonged anti-viral effect againstHBV," said Carlos Lopez, Lilly's director of virology. "We believeFIAU has significant potential as the world's first oral therapy"for the disease.

Initially targeted for treating HBV in AIDS patients, Phase IIclinical trials were expanded to include non-HIV patients.

Oclassen of San Rafael, Calif., filed last April for a 2.5 million-share initial public stock offering that would have raised morethan $25 million. The IPO market stalled in the weeks followingthe Oclassen's filing.

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