Transition Therapeutics said today it has exclusively licensed—through a wholly owned Irish subsidiary—rights to develop and commercialize Eli Lilly’s small-molecule muscle drug candidate TT701 from the pharma giant for up to $100 million.

TT701 is a selective androgen receptor modulator that has been shown in a Phase II study to significantly increase lean body mass and a measurement of muscle strength in male subjects. The 12-week study of 350 subjects also showed additional beneficial effects, including significant fat mass reduction with no significant change in prostate specific antigen (PSA) levels, according to Transition.

Transition said it is evaluating multiple development paths for TT701, including as a therapeutic for patients with androgen deficiency. The company said it is in talks with potential collaborators to rapidly launch a Phase II clinical study.

“The safety and efficacy profile of TT701 creates a number of development opportunities. TTIL will initiate development and manufacturing activities to enable the start of a Phase 2 study in the coming months,” Transition chairman and CEO Tony Cruz, Ph.D., said in a statement.

Transition has agreed to pay Lilly a contingent upfront payment of up to $1 million, as well as up to $100 million tied to achieving commercial milestones, and a mid-single digit royalty on sales of TT701 products should such products be successfully commercialized.

The companies are collaborating on development of another drug, TT401 (LY2944876) for type 2 diabetes and associated obesity. Lilly obtained all development and commercialization rights to that drug from Transition in 2013, and is carrying out a Phase II trial launched last year. Transition initially licensed the drug candidate as one of a set of preclinical compounds from Lilly in 2010.

If TT401 is successfully commercialized, Transition will be eligible to receive about $240 million in additional milestone payments, plus a double-digit royalty on sales of TT401 products and a low single digit royalty on related compounds.

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