Daiichi Sankyo will co-develop and commercialize in the U.S. Charleston Laboratories’ investigational combination hydrocodone drugs for moderate to severe acute pain and opioid-induced nausea and vomiting (OINV), in a deal that could net Charleston up to $650 million, the companies said today.

Among drugs to be co-developed is the experimental pain compound CL-108, a fixed-dose, bi-layered tablet combining 12.5 mg of immediate-release promethazine with a modified release of 7.5 mg of hydrocodone and 325 mg of acetaminophen.

Back in May at the 2014 Annual Meeting of the American Pain Society in Tampa, FL, Charleston Labs published an abstract and poster with results of a recently completed 465-patient Phase III trial studying the effects of CL-108 as a treatment for moderate to severe acute pain—such as post-operative pain—and the reduction of OINV. CL-108 demonstrated high statistical significance in fighting both disorders, with the company halting the trial last October at the midway point.

Daiichi Sankyo’s U.S. subsidiary will serve as exclusive commercialization partner for CL-108 in the U.S., while Charleston Labs will oversee manufacturing activities for CL-108, and will receive the right to co-promote that and other hydrocodone products in the U.S.

In return, Daiichi Sankyo agreed to pay Charleston Labs $200 million—to be split evenly between an upfront cash payment and an undisclosed near-term milestone—and up to an additional $450 million in milestone payments connected to FDA filing and approval of its fixed-dose hydrocodone products in the U.S. In addition, Charleston Labs will receive escalating, tiered, double-digit share of the gross operating margin from the products, and will be responsible for supplying all product. The deal is subject to the Hart-Scott-Rodino Act.

“CL-108 represents an opportunity at the intersection of innovation and patient need,” Ken Keller, Daiichi Sankyo’s president, U.S. commercial operations, said in a statement. “Daiichi Sankyo has proven success in the U.S. primary care arena, a key market for pain management, and we look forward to the potential of CL-108.”

Daiichi Sankyo markets pharmaceuticals for hypertension, hyperlipidemia and bacterial infections, is developing treatments for thrombotic disorders, and is working to discover early-stage compounds prior to proof-of-concept in the therapeutic areas of oncology and cardiovascular and metabolic disorders, especially type 2 diabetes. On the cardiovascular front, Daiichi Sankyo seeks new approaches for treatment of Peripheral arterial disease (PAD), arteriosclerosis/atherosclerosis, aneurysm, and acute and chronic heart failure, according to its website.

“Daiichi Sankyo has successfully commercialized several medicines in the United States, and we feel they are the ideal strategic fit for Charleston's lead asset, CL-108,” added Ryan Baker, Charleston Labs founder and COO.

Privately held Charleston Labs develops new pain products designed to significantly reduce side effects related to opioid analgesics and other products. The company’s pipeline includes CL-H1T, a new fixed dose formulation of a triptan combined with an anti-emetic in a release technology, set to be investigated for treatment of migraine headaches and the reduction or elimination of migraine-induced nausea and vomiting (MINV).

In addition to MINV and OINV, Charleston said it is also looking to develop compounds to treat postoperative nausea and vomiting (PONV), chemotherapy-induced nausea and vomiting (CINV), radiation-induced nausea and vomiting (RINV).

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