Development and regulatory milestones could reach $72.5 million.

Santarus is paying Cosmo Technologies $2.5 million in cash plus six million shares of its common stock for U.S. rights to two drugs intended for use in lower gastro-intestinal conditions. The agreement covers late-stage candidates Rifamycin SV MMX and Budesonide MMX and has a potential value of over $77.8 million.

Rifamycin has completed testing in a Phase II program for traveler’s diarrhea, and Budesonide MMX is in late-stage development for ulcerative colitis (UC). Cosmo could receive up to $9 million in clinical and regulatory milestones related to these initial clinical indications.

If Rifamycin gets developed in a second indication, Santarus will pay up to $6 million in clinical and regulatory success-based fees. Assuming regulatory approval and commercial launch, Cosmo could earn up to $57.5 million in commercial milestones  and tiered royalties on net sales of each product ranging from 12% to 14%. All milestones are payable in cash or Santarus common stock as per Cosmo’s option.

Santarus will reimburse Cosmo approximately $2.8 million by January 31, 2009, which represents the company’s 50% share of the Phase III trial costs for Budesonide MMX incurred by Cosmo through mid-November 2008.

Going forward, Santarus will be responsible for 50% of costs associated with the ongoing U.S. registration and European Budesonide MMX Phase III programs and all costs for the future Phase III U.S. registration study for Rifamycin SV MMX.

Cosmo or its affiliate will be responsible for the manufacture and supply of the products under a supply agreement to be negotiated at a later date.

Budesonide MMX is an oral corticosteroid currently being investigated in two multicenter Phase III trials involving more than 800 patients in North America and Europe for the induction of remission of mild-to-moderate UC. Budesonide MMX is designed to retain the effectiveness of classical corticosteroids but with reduced side effects due to its targeted controlled release in the colon with minimal systemic absorption. An NDA submission is planned for the second half of 2010.

Rifamycin SV MMX is a broad-spectrum, semisynthetic antibiotic that also has targeted release characteristics when taken orally. The application of MMX technology to Rifamycin SV allows the antibiotic to be delivered directly to the colon, with the goal of minimizing unwanted effects on the bacterial flora in the small intestine, the firms explain.

Cosmo’s MMX Multi Matrix System® technology is designed to produce a controlled-release, homogeneous local application of the API throughout the colon. It consists of a sequence of lipophilic and amphiphilic matrices dispersed within a hydrophilic matrix. MMX tablets are coated with gastro-resistant polymers that protect the API against degradation in the upper gastrointestinal tract and delay the release of the API until the tablet reaches the colon.

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