SurModics (Eden Prairie, Minnesota) and Merck (Whitehouse Station, New Jersey) yesterday reported a license and research agreement to pursue the joint development and commercialization of the I-vation sustained drug delivery system for the treatment of serious retinal diseases.

The agreement would also include other products that combine drug compounds from Merck with the I-vation system.

SurModics will receive an up-front licensing fee of $20 million and would be eligible to receive up to an additional $288 million in fees and development milestones associated with product development and attaining U.S. and EU regulatory approvals for these new combination products.

In addition, Merck will reimburse SurModics for its development activities, and SurModics will be responsible for the manufacture and supply of clinical and commercial products. SurModics also will receive royalties on product sales.

The I-vation Intravitreal Implant, is a system capable of delivering a variety of drugs on a sustained release basis for more than a year and may be removed once the drug has been fully released.

Merck will lead and fund development and commercialization of the SurModics I-vation drug delivery platform in combination with triamcinolone acetonide and proprietary Merck compounds.

“This announcement marks the first license of our sustained drug delivery technology platforms in a large and strategically important ophthalmology market,” said Bruce Barclay, president and CEO of SurModics. “We have blended Merck’s talented team’s product development expertise and proprietary compounds with Turmeric’s knowledge and expertise in formulating these compounds into our proprietary ivation sustained delivery system.”

“Anytime you have a chance to work with the top 10 pharmaceutical companies especially as one as capable and successful as Merck you have to take that very seriously as we did and we couldn’t be happier with a partner.”

During a teleconference yesterday, representatives from both companies touted the deal as a “win-win” situation with the possibility of dramatically increasing revenue sources surpassing profits from SurModics’ agreement with Johnson and Johnson (New Brunswick, New Jersey) regarding the Cypher drug-eluting stent (DES) made by the Cordis (Miami Lakes, Florida) unit of J&J. The Cypher DES incorporates a SurModics polymer coating used to attach drug to device.

“In total over roughly the last 10 years the Cypher agreement has generated $130 million in total revenue for SurModics,” saidPhil Ankeny, senior VP and CFO of SurModics. “By comparison [this agreement with Merck] has the ability to be the largest customer agreement in SurModics history. In the nine-and-a-half years since going public in 1998, SurModics has generated total revenue of $353 million. In short, we believe this agreement has the ability to significantly enhance shareholder value.”

The agreement does not exclude SurModics from working with other companies in some cases, the company said.

“While the license for Ivation is exclusive, Paul Lopez, Ophthalmology division president, said that the license for Ivation is exclusive but the agreement doesn’t preclude SurModics from working “with other partners who have compounds not included in the scope of the licensing agreement.”

“We do have the opportunity to continue to work with current partners and potential partners,” Barclay said, underlining that point.

The companies haven’t set a release date as to when products targeted for development by this deal might reach patients.

“We’re in the midst of development effort, and I think we’ll get a much better idea of [timing of commercialization] as we get further into the development process,” Lopez said.

SurModics develops surface modification technologies in the areas of biocompatibility, site-specific drug delivery, biological cell encapsulation, and medical diagnostics.

Last year, SurModics’ board authorized the repurchase of $35 million of the company’s outstanding common stock (Medical Device Daily, Sept. 19, 2006).

It’s presence in ophthalmology was expanded in January of 2005 when it acquired InnnoRx , a drug delivery company that had had been developing a drug coated intevitrial implant.

Prior to the acquisition, SurModics held an ownership interest in InnoRx of less than 20%. To acquire the remaining interest, SurModics paid about $4.1 million in cash and issued about 600,000 shares of SurModics stock (MDD, Jan. 20, 2005)

In other dealmaking news:

• Mediscience Technology (Cherry Hill, New Jersey) reported it has entered into an agreement with equity partner Infotonics Technology Center ( ITC; Rochester, New York) under which ITC will further develop Mediscience’s medical diagnostic systems via two initial advanced medical products, the Optical Biopsy Pill (OBP) and the CD Ratiometer (CDR) using tissue auto-fluorescence to detect disease states.

Mediscience has agreed to pay $2 million.

In the agreement, ITC will use its best efforts to secure grant awards to meet the $2 million obligation of Mediscience. The agreement is also intended to benefit BioScopix , Mediscience’s subsidiary that is expected to own the medical diagnostic systems using tissue auto-fluorescence to detect disease states as that technology is further developed.

The parties expect impact funding from a NYSTAR grant award of $750,000 applied for by Infotonics and the receipt by subsidiary BioScopix of an initial $2 million to $3 million of bridge funding through Empire Financial Group to continue commercialization.

Mediscience develops devices used to detect cancer and physiological change.

• Nantero , (Woburn, Massachusetts), a nanotechnology company using carbon nanotubes for the development of next-generation semiconductor devices, reported providing license rights for biomedical sensors to Alpha Szenszor (Woburn, Massachusetts)

Alpha Szenszor is developing sensor products in the medical field, including portable detectors for infectious diseases such as HIV. These products will allow testing of a range of diseases such as cold and flu, cancer, heart disease, sexually transmitted infections, food contamination, and the presence of other life-threatening disorders.