Curis Inc. licensed out a valuable asset to a Johnson & Johnson unit, giving up most of its bone morphogenetic protein portfolio in a move with major upside potential for a company realigning itself.

"This is another significant step for us in our transition toward a viable and sustainable business model," said Daniel Passeri, Curis' president and CEO. "It creates the prospect of the value [of the portfolio] being realized by a highly capable pharmaceutical company without required burn on Curis' side."

Curis, of Cambridge, Mass., licensed the bone morphogenetic protein technology - called BMP compounds - to Ortho Biotech Products LP. The portfolio includes BMP-7, and Ortho gets rights for all indications except for the repair or regeneration of local musculoskeletal tissue defects and dental defects - indications covered under a separate agreement with Stryker Corp., of Kalamazoo, Mich.

Ortho will work with two of its research associates, Johnson & Johnson Pharmaceutical Research & Development LLC and Centocor Research & Development, on progressing the preclinical compounds.

Curis receives $3.5 million up front in the deal, as well as milestone payments and an undisclosed royalty rate on product sales. Although unwilling to disclose more specific financial details, the companies did release a notable teaser: The U.S. approval of a product to treat kidney disease or associated complications would bring Curis $30 million.

Curis released the news Tuesday afternoon. Its stock (NASDAQ:CRIS) jumped 35 cents before the markets closed Tuesday, or 42 percent, to close at $1.18. It closed Wednesday at $1.08.

In the BMP portfolio, BMP-7 is the "specific compound being focused on," Passeri told BioWorld Today. The proteins are development morphogens, he explained, and "known to be essential during embryonic development for tissue generation."

"It has been discovered that the same morphogens are used throughout growth and recapitulated during repair processes," he said. "They are essential for tissue formation, maintenance and repair."

That potentially makes them applicable to various disorders, such as renal disease and associated complications and potentially applicable to neurology disorders such as stroke.

Passeri stepped to Curis' helm in September 2001 with a plan to guide the ship through a biotechnology sector quickly adopting a strict survival-of-the-fittest mindset.

"The first thing we had to do was stabilize the company," Passeri said. "We needed to take a hard look at where Curis was headed, and the first objective was to ensure we would survive."

In February, Curis announced it was restructuring by cutting about 35 employees and dropping clinical development efforts of Chondrogel, a cell-based minimally invasive tissue augmentation product. It also suspended development of Vascugel, a cellular transplant product for coronary artery disease. The moves were made as a way of getting back to basics. (See BioWorld Today, Feb. 19, 2002.)

"We are looking at our portfolio assets and managing them by focusing on our fundamentals," Passeri said. "Investors want to see a focus on fundamentals, they want to see a path forward that focuses on revenue generation. [The BMP portfolio out-licensing] is the first step in fulfilling that obligation."

When the company began 2002, it had an estimated burn of about $50 million annually. Thanks to a thinner, zeroed-in Curis, that burn is now about $22 million per year, a figure Passeri expects to fall further. The company would like to have 2.5 years of cash on hand and is close to achieving that goal. After selling future royalty rights to its BMP-07 (OP-1) technology for orthopedic and dental applications to licensee Stryker for $14 million - a deal finalized on Oct. 1 - Curis reported a pro forma cash position of about $43.4 million.

Curis also has a hedgehog protein program. The proteins are believed to induce the formation or regeneration of tissues. The company formed a joint venture with Elan Corp. plc, of Dublin, Ireland, initially to focus on the proteins in Parkinson's disease and diabetic neuropathy. Elan has undergone a restructuring of its own, including the juggling or dissolving of many of its joint ventures, in an attempt to raise at least $1 billion in cash by the end of 2003. Passeri was unable to comment on Elan's plans, but said the program was "progressing very well."

"We've achieved very good preclinical milestones and Elan has expressed interest in the program," he said, adding that Curis was "in close dialogue with Elan on ways to move forward."

Although the deal with a respected pharmaceutical player such as New Brunswick, N.J.-based Johnson & Johnson brings validity to Curis' science and business model, Passeri said, it also fits in with the plan for Curis' stability and growth potential.