Endo Pharmaceuticals Holdings Inc. entered an agreement to develop and commercialize Durect Corp.'s Chronogesic pain therapy system for the U.S. and Canada, a deal that could be worth up to $57 million for Durect.

"We wanted to take this product as far as we felt comfortable, and we have gained most of the value by looking all the way into Phase II and a pilot Phase III," Durect Chairman and Chief Scientific Officer Felix Theeuwes said. "At this point in time, we need a strong commitment to go into the marketplace, and therefore this is an ideal time for us to actually partner the product."

Cupertino, Calif.-based Durect will be responsible for further design and development of Chronogesic, designed to provide the opioid sufentanil for an uninterrupted, three-month period in patients with chronic pain resulting from a variety of malignant and nonmalignant causes. But its program is on temporary hold pending agreement between Durect and the FDA regarding patient monitoring and data collection. The agency in August requested the trial protocol be amended to provide for additional patient monitoring before further enrollment. Durect said the changes were not in response to any observed safety issue or adverse event, adding that Chronogesic was shown to have an acceptable safety and efficacy profile in more than 80 patients.

Chadds Ford, Pa.-based Endo will purchase $5 million of newly issued common shares of Durect, based on the average closing price of the last 10 trading days. Durect's stock (NASDAQ:DRRX) jumped 45 cents Monday, or 14 percent, to close at $3.69. Bill Newbould, Endo's vice president of corporate communications, said the stock purchase represents a minimal stake in Durect's outstanding shares.

Once the clinical trials begin again - expected during the second half of next year - Endo will fund 50 percent of ongoing development costs, and will reimburse Durect for a portion of prior development costs upon the achievement of milestones, including clinical success, as well as FDA and Canadian regulatory approvals.

Such milestone payments could total up to $52 million.

"Endo in many ways is an ideal partner for us," Theeuwes said. "They have a great marketing and sales organization, and they're very complementary to what we are, which in many ways is an R&D organization. And they are very much committed to the pain franchise, and in that sense we couldn't have found a better partner."

Endo licensed exclusive promotional rights to Chronogesic in the U.S. and Canada. Endo will be responsible for marketing, sales and distribution, responsibilities that include providing specialty sales representatives to supply technical and training support for Chronogesic therapy. Durect will manufacture Chronogesic, a small, self-driven titanium capsule placed just under the skin that dispenses drug by osmosis at a highly controlled rate.

"The pain management market is emerging and growing," Newbould said. "Patients and physicians will need alternatives to currently available therapies, and this could potentially be that kind of alternative."

Theeuwes said the product would operate in a pain market estimated at $2 billion to $3 billion. Endo and Durect will share profits equally.

Chronogesic is based on Duros technology, licensed in 1998 from Mountain View, Calif.-based Alza Corp., a unit of New Brunswick, N.J.-based Johnson & Johnson. Following an acquisition of Birmingham, Ala.-based Southern BioSystems Inc., Durect gained Saber, Durin and Microdur technologies, all of which are capable of delivering drugs from days to a year.

"With these acquisitions we have four technology bases, out of which we are developing products for our own and also for developing partners in various fields," Theeuwes said.

Other products earlier in development are designed to reduce opioid intake, deliver pain management drugs through the spinal cord and treat Alzheimer's disease.

For Endo, the agreement signals a deeper drive into its pain management business. Three years ago, Endo entered a $1.1 billion merger with Neptune, N.J.-based Algos Pharmaceutical Corp. to create a combined pain management company. (See BioWorld Today, Nov. 30, 1999.)

Endo has in late-stage development a recently completed Phase III program for oxymorphone to treat severe pain. It expects to file a new drug application by the end of the year for both extended- and immediate-release formulations. Another product, an oral rinse designed to treat oral mucositis, is in Phase III.

Endo's shares (NASDAQ:ENDP) fell 11 cents Monday to close at $7.14.