In its second major collaboration involving melanocortin receptors, Palatin Technologies Inc. signed a potential $310 million deal with AstraZeneca plc to develop small-molecule compounds for obesity and other metabolic disorders.

The early stage agreement provides London-based AstraZeneca with access to Palatin's melanocortin receptor (MCR) program in obesity, along with its compound libraries and technologies for MCR drug discovery and development.

In exchange, Palatin gets $10 million up front, and is eligible to receive up to $180 million in development and regulatory milestones plus another potential $120 million based on sales milestones.

On top of that, Palatin would receive stepped royalties to double-digit rates on sales of any product resulting from the collaboration.

Shares of Palatin (AMEX:PTN) rose 28 cents, or 13.7 percent, Wednesday to close at $2.33.

With more than 1 billion adults worldwide considered overweight and 300 million of those considered obese, large pharma has come to "view obesity as a huge market opportunity," said Carl Spana, president and CEO of Cranbury, N.J.-based Palatin.

"It's becoming the largest healthcare issue" because it can lead to so many other disorders, such as diabetes, hypothyroidism and congestive heart disease, he added.

AstraZeneca last year said it would be turning attention to the metabolic disorder space, and earlier this month, signed a potential $1 billion deal with New York-based Bristol-Myers Squibb Co. to develop diabetes drugs. The company is "building an impressive franchise" in that space, Spana said, making it the ideal partner for Palatin's preclinical program.

It's also a "good transition for us," he said. "It shows we're not just a one-product company."

Prior to this, Palatin's MCR discovery platform produced an MCR agonist, bremelanotide (formerly PT-141) to treat male and female sexual dysfunction.

The product, which the company partnered in a potential $250 million deal with Bristol, Tenn.-based King Pharmaceuticals Inc. in mid-2004, yielded positive Phase II data in both erectile dysfunction and female sexual arousal disorder. Phase III trials in ED are expected to begin in the first half of this year. (See BioWorld Today, Aug. 16, 2004.)

In the King collaboration, which Spana called "more of a joint venture," it was important for Palatin to retain rights to the product in North America in exchange for accepting a share of the development risk.

The deal with AstraZeneca, however, is more of a traditional licensing, in which Palatin "transferred our risk on the program," he said.

From this point on, AstraZeneca will assume responsibility for discovery, development and commercialization activities related to the MCR4 obesity program, which is in late preclinical development. Although AstraZeneca has not yet provided a timeline, Spana said the obesity program "is a priority."

AstraZeneca is "very enthusiastic about the science" behind Palatin's research targeting MCR4, he told BioWorld Today. MCR4 is a receptor found in the hypothalamus that "plays a key role in obesity."

Data show that MCR4 appears to regulate food intake, and mutations of the MCR4 receptor likely are responsible for a genetic predisposition to obesity.

Endogenous hormones, such as leptin, also have been shown to affect MCR4's activity. And, in preclinical studies, researchers showed that mice missing the MCR4 receptor tended to overeat and become grossly obese, Spana said.

But, he added, "it's a tricky receptor to deal with," because it's regulated by both natural agonists and antagonists.

Without the right balance, the drug could produce unwanted side effects, such as sexual dysfunction, and that's where Palatin's technology comes into play. It's able to start with a peptide, take it apart and design it so it can reduce a patient's food intake without the side effects.

In its preclinical pipeline, Palatin is working on other MCR receptors targeting diseases such as congestive heart failure and cachexia.

Palatin, which expects to report earnings for the last quarter of 2006 in the next two weeks, posted a net loss of $8.4 million, or 12 cents per share, for the three months ending Sept. 30, 2006.

At that time, the company had cash totaling $20.5 million.