King/Mylan Merger Will Provide Critical Mass To Develop Palatin ED Agent

Mylan's acquisition of King will provide the critical mass necessary to develop PT-141, a Phase II intranasal sexual dysfunction agent in-licensed from Palatin, King said.

"When considering our pending merger with Mylan Laboratories and the potential strength of the combined core competencies of King and Mylan, our ability to optimize the commercial potential of PT-141 should be substantial," King said.

King and Palatin announced Aug. 13 that the companies had entered into a collaborative agreement to develop the inhaled agent PT-141 for male erectile dysfunction and female sexual dysfunction.

Under the terms of the agreement, King will pay $20 mil. upfront (including a $5 mil. equity stake in Palatin), up to $100 mil. in regulatory milestones and $130 mil. in sales milestones.

The deal comes less than three weeks after the announcement of Mylan's proposed all-stock acquisition of King for $4 bil. (¹ (Also see "Mylan Places Big Bet On Antihypertensives: $4 Bil. Deal For King" - Pink Sheet, 2 Aug, 2004.), p. 6).

Both companies said the merger would leverage Mylan's regulatory, manufacturing and compliance experience with King's experience in marketing branded products (such as the antihypertensive Altace ).

[Editor's note: Coverage of Mylan's revised earning estimates and the implications of recent stock moves for the King merger appeared in ² "The Pink Sheet" DAILY on Aug. 20. To sign up for a free trial, visit our website, ThePinkSheetDAILY.com.]

"What we're really doing" with the Palatin in-licensing deal "is creating the type of transaction here that is absolutely going to be a part of the go-forward strategy for the combined entity," King CEO Brian Markison said during an investor conference call Aug. 13.

"We are even more excited to have Mylan as a part of this when the merger closes," he said. Mylan was included in the negotiations with Palatin over PT-141.

"Obviously, when you look at the timing of the Palatin announcement that we just made, Mylan was involved and, in fact, sat side-by-side with us on many parts of this," Markison told analysts. "We were very happy to have them with us at the table to talk about some of these things."

King believes that PT-141, a melanocortin receptor agonist, will be safer and more effective compared to the marketed phosphodiesterase-5 inhibitors for erectile dysfunction (Pfizer's Viagra ,Lilly/Icos' Cialis and Bayer/GlaxoSmithKline's Levitra ).

One potential benefit PT-141 may have compared to the PDE-5 inhibitor class is improved sexual function without directly acting on the vascular system, King and Palatin maintained.

"Unlike PDE-5 inhibitors, which are contraindicated in taking nitrates primarily for the treatment of cardiovascular disease, current clinical data indicates that PT-141 should not have any drug interactions with nitrates."

The companies also touted the product's intranasal delivery system.

"The nasal formulation of PT-141 currently under development is as convenient as oral treatments, is more patient-friendly than invasive treatments for ED, such as injections and trans-urethral pellets, and appears to result in a rapid onset of action."

In addition, King and Palatin believe that PT-141 will serve an unmet medical need because of a high rate of patients unresponsive to PDE-5 inhibitors.

"Current literature indicates that about one-half of all patients who receive an initial prescription for a PDE-5 inhibitor do not renew the prescription due chiefly to adverse side effects, drug interaction issues and/or the lack of an acceptable level of responsiveness," the companies said.

A fierce battle is underway for ED market share. All three PDE-5 inhibitor manufacturers have offered free samples as part of their marketing efforts (³ (Also see "“Cialis Challenge”: ED Drug Sampling Hides True Market Growth, Icos Says" - Pink Sheet, 10 May, 2004.), p. 41).

However, none of the products have been successful in gaining indications for female sexual dysfunction, and Pfizer has stopped studying the indication altogether. King and Palatin believe that PT-141 can be successful for use in women.

Palatin expects to begin a Phase II dose-finding study for PT-141 in the fall and to complete the trial by the beginning of 2005. The company anticipates beginning a pivotal trial by the end of 2005 or early 2006, with product launch targeted for the first half of 2008.