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Santarus Announces Strategic Collaboration with Cosmo for U.S. Rights to Budesonide MMX and Rifamycin SV MMX

^{Published on 2008-12-15 04:48:07 - Market Wire}
 

SAN DIEGO--([ BUSINESS WIRE ])--Santarus, Inc. (NASDAQ:SNTS) today announced that it has entered into a strategic collaboration with Cosmo Technologies Limited (Cosmo), a wholly owned subsidiary of Cosmo Pharmaceuticals SpA (SIX:COPN), which grants Santarus exclusive rights to develop and commercialize Budesonide MMX^® and Rifamycin SV MMX^® for the U.S. market. Terms of the agreements include an upfront payment to Cosmo of cash and Santarus common stock, shared development costs, clinical/regulatory and commercial milestones and a royalty on net sales, as more fully described below.

Budesonide MMX is an oral corticosteroid currently being investigated in two multi-center Phase III clinical trials involving more than 800 patients in North America and Europe for the induction of remission of mild-to-moderate ulcerative colitis. 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. Santarus will be responsible for overseeing the Phase III U.S. registration clinical trial, and Cosmo and its partner in Europe, Ferring Pharmaceuticals, are overseeing the European Phase III clinical trial. The protocols for both Phase III clinical trials have been reviewed and approved by the U.S. Food and Drug Administration (FDA), under Special Protocol Assessments, and have been reviewed and approved by two European agencies. Assuming successful completion of the Phase III clinical program and an extended use safety trial, a New Drug Application (NDA) submission is planned for the second half of 2010.

Rifamycin SV MMX is a broad spectrum, semi-synthetic 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. Cosmo has completed a Phase II clinical program in traveler's diarrhea. Santarus will be responsible for the design and execution of a Phase III U.S. registration clinical trial for traveler's diarrhea, while the European Phase III clinical trial in the same indication will be conducted by Cosmo's European partner, Dr. Falk Pharma GmbH. A pre-IND meeting has been requested with the FDA and is expected to take place in the first quarter of 2009.

These two compounds are formulated using Cosmo's patented MMX Multi Matrix System^® technology. MMX is a proprietary technology platform designed to produce a controlled release, homogeneous local application of the active pharmaceutical ingredient (API) throughout the colon, thereby limiting systemic absorption and offering an opportunity for reduced side effects. The MMX technology is covered by two issued U.S. patents that expire in mid-2020, and additional patent applications are pending at the U.S. Patent and Trademark Office.

"Our business objectives are well aligned with Cosmo's to successfully develop and commercialize these late-stage compounds that are designed to address difficult-to-treat lower GI conditions and we are extremely pleased to broaden our clinical pipeline through this strategic collaboration," said Gerald T. Proehl, president and chief executive officer of Santarus, Inc. "Importantly, Cosmo has prior experience in developing and partnering a lower GI drug for the U.S. market as evidenced by the successful U.S. commercialization of LIALDA^™ (mesalamine), Cosmo's first commercial product formulated with the MMX technology."

Mauro Ajani, chief executive officer of Cosmo Pharmaceuticals, said, "After a thorough assessment of potential U.S. partners, we determined that Santarus is an excellent choice for the clinical, regulatory and commercial development of Budesonide MMX and Rifamycin SV MMX for the U.S. market. Santarus has a strong focus and commitment to the GI specialty, and a successful track record in advancing products from clinical development through commercialization. We have already begun to develop a strong working relationship and we believe the two companies bring complementary skills to the collaboration. Our equity ownership position in Santarus will further align our interests and it reflects our confidence in the long-term value of Santarus' business."

Under the terms of the agreements:

• Santarus will pay Cosmo an upfront cash fee of $2.5 million and will issue to Cosmo 6 million shares of Santarus common stock. These shares will be subject to an initial 15-month restriction on their sale or transfer.
• Santarus may also pay Cosmo up to a total of $9 million in clinical and regulatory milestones for the initial clinical indications, up to $6 million in clinical and regulatory milestones for a second indication for Rifamycin SV MMX, and up to $57.5 million in commercial milestones. If and when earned, the milestones will be payable at Cosmo's option in either Santarus common stock or in cash, subject to certain limitations.
• Santarus will reimburse Cosmo approximately $2.8 million by January 31, 2009, which represents Santarus' 50% share of the Phase III clinical trial costs for Budesonide MMX incurred by Cosmo through mid-November 2008.
• Going forward, Santarus will be responsible for 50% of the costs associated with the ongoing U.S. registration and European Budesonide MMX Phase III clinical trials and all costs for the future Phase III U.S. registration clinical trial for Rifamycin SV MMX.
• Assuming regulatory approval and commercial launch, Santarus will pay to Cosmo tiered royalties on net sales of each product ranging from 12% to 14%, subject to reduction in limited circumstances.
• 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.

Santarus Financial Outlook for 2008

Santarus today announced updated 2008 financial guidance.

• Santarus continues to expect to report total revenues in excess of $125 million, reflecting estimated year-over-year growth of ZEGERID^® net product sales of at least 25%.
• With the execution of the Cosmo agreements, Santarus plans to expense in the fourth quarter the value of the upfront fee of stock and cash, and to accrue for its share of out-of-pocket clinical trial expenses incurred in 2008. The impact of these deal-related expenses is expected to result in a net loss in the fourth quarter, versus prior guidance of achieving breakeven. However, excluding fees and expenses payable to Cosmo, Santarus continues to expect to achieve breakeven in the fourth quarter and to have full year net loss results consistent with prior guidance.

Santarus Conference Call

Santarus has scheduled an investor conference call regarding this announcement at 10:00 a.m. Eastern time (7:00 a.m. Pacific time) today, December 15, 2008. Individuals interested in participating in the call may do so by dialing 888-803-8275 for domestic callers or 706-643-7736 for international callers. A telephone replay will be available for 48 hours following conclusion of the call by dialing 800-642-1687 for domestic callers, or 706-645-9291 for international callers, and entering reservation code 77972222. The live conference call also will be available via the Internet by visiting the Investor Relations section of the company's Web site at [ www.santarus.com ], and a recording of the call will be available on the company's Web site for 14 days following the completion of the call.

MMX Technology

The MMX technology 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. The multi-matrix system results in the controlled release and homogeneous distribution of the APIs throughout the length of the colon.

Ulcerative Colitis

Ulcerative colitis is a type of inflammatory bowel disease (IBD) that produces inflammation and ulcers along the inside of the large intestine. The inflammation can interfere with the normal function of the colon, often causing cramping, bloating, diarrhea, bleeding, fatigue, weight loss and frequent bowel movements, which may also strongly affect quality of life. It is believed that as many as 1.2 million people in the U.S. have IBD.

Ulcerative colitis is a chronic relapsing-remitting illness for which there is no known cure, but with appropriate treatment patients can manage their symptoms. However, it is estimated that up to 30% of patients with mild-to-moderate ulcerative colitis respond poorly to first-line treatment with aminosalicylate (5-ASA) drugs. Patients refractive to treatment with 5-ASA drugs are typically put on a course of oral corticosteroid treatment, the success of which may be limited by significant side effects. For moderate to severe cases, immunosuppressant drugs or biologic drugs may be prescribed. If the condition does not respond to pharmaceutical therapy and the symptoms are severe, the patient may be referred for surgery.

Infections of the Colon and Other GI Conditions Treated with Antibiotics

Infections of the colon are caused by bacteria, [ virus ]es or [ parasite ]s. A common colon infection is traveler's diarrhea, which is primarily caused by the ingestion of food or water contaminated by bacteria. According to the U.S. Centers for Disease Control and Prevention, each year between 20% and 50% of international travelers (or an estimated 10 million people) develop diarrhea, with approximately 80% of the cases caused by bacteria. Other infections of the colon include diverticulitis (bacterial inflammation of the diverticula of the colon) and hospital acquired C. difficile infections.

Antibiotics are also used to treat hepatic encephalopathy, which is a neurological disorder related to liver impairment. In the presence of hepatic dysfunction, the ammonia normally produced in the intestine by bacteria is not neutralized by the liver. When the ammonia is absorbed into the blood circulation it reaches the brain, producing toxic effects. Antibiotics are used to reduce the bacterial production of ammonia in the lower GI tract.

About Cosmo Pharmaceuticals

Cosmo is a specialty pharmaceutical company that aims to become a global leader in optimized therapies for certain gastrointestinal diseases. The company's proprietary clinical development pipeline specifically addresses innovative treatments for IBD, such as ulcerative colitis and Crohn's disease, and colon infections. Cosmo's first product is LIALDA™ / MEZAVANT^® that is licensed globally to Giuliani and Shire Pharmaceuticals. Cosmo's proprietary MMX technology is at the core of the company's product pipeline and was developed from its expertise in formulating and manufacturing gastrointestinal drugs for international clients at its GMP (Good Manufacturing Practice) facilities in Lainate, Italy. For further information on Cosmo, please visit the company's website at [ www.cosmopharmaceuticals.com ].

About Santarus

Santarus, Inc. is a specialty pharmaceutical company focused on acquiring, developing and commercializing proprietary products that address the needs of patients treated by gastroenterologists or primary care physicians. The company's current marketing efforts are primarily focused on ZEGERID^® (omeprazole/sodium bicarbonate) Capsules and Powder for Oral Suspension, which are indicated for the treatment of certain upper GI diseases and disorders, and on GLUMETZA^® (metformin hydrochloride extended release tablets), which is indicated as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes. More information about Santarus is available on the company's Web site at [ www.santarus.com ].

Statements included in this press release that are not a description of historical facts are forward-looking statements.These forward-looking statements include statements regarding projected total revenues, net product sales and net loss and regarding the development timelines and market potential for Budesonide MMX and Rifamycin SV MMX.The inclusion of forward-looking statements should not be regarded as a representation by Santarus or Cosmo that any of its plans will be achieved.Actual results may differ materially from those set forth in this release due to the risks and uncertainties inherent in Santarus' and Cosmo's business, including, without limitation: risks related to the exclusive U.S. collaboration between Cosmo and Santarus for Budesonide MMX and Rifamycin SV MMX (including the parties' ability to successfully develop and obtain regulatory approval for Budesonide MMX and Rifamycin SV MMX in a timely manner or at all; competition from other products; unexpected adverse side effects or inadequate therapeutic efficacy of the Cosmo product candidates;the scope and validity of patent protection for the Cosmo product candidates; and the potential for termination of the collaboration); other difficulties or delays relating to the development, testing, manufacturing and marketing of, and maintaining regulatory approvals for, Santarus' and its strategic partners' products; fluctuations in quarterly and annual results; the ability to achieve any financial guidance related to specific fiscal periods; and other risks detailed in Santarus' prior press releases and public periodic filings with the Securities and Exchange Commission.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.All forward-looking statements are qualified in their entirety by this cautionary statement and Santarus undertakes no obligation to revise or update this news release to reflect events or circumstances after the date hereof.This caution is made under the safe harbor provisions of Section 21E of the Private Securities Litigation Reform Act of 1995.

MMX^® is a registered trademark owned by Cosmo Technologies Ltd.Santarus^® and ZEGERID^® are registered trademarks of Santarus, Inc. GLUMETZA^® is a trademark of Biovail Laboratories International S.r.l. licensed exclusively in the United States to Depomed, Inc.LIALDA^™ and MEZAVANT^® are registered trademarks of Shire LLC.