Nycomed strengthens its nuclear medicineposition with $10 million investment in Diatech

Diatech has five peptide-based agents in clinical trials

Norwegian pharmaceutical giant Hafslund Nycomed this month madea bid to strengthen a presence in the radiopharmaceutical marketwith a $10 million equity investment in Diatech, a U.S. developerof peptide-based imaging agents. The move is an important voteof confidence for Diatech, which is trying to avoid the pitfallsencountered by other firms seeking to commercialize targeted radiopharmaceuticals.

Under the terms of the deal, Hafslund Nycomed will providea $10 million investment, R&D financial support and milestoneand royalty payments to Diatech, of Londonderry, NH. In exchange,the Oslo company's Nycomed Imaging subsidiary will receive a five-yearoption to an exclusive license to market Diatech's products inEurope and the Middle East, as well as co-promotion rights inthe U.S. Nycomed will sell Diatech products in the U.S. to hospitalsand group purchasing organizations (GPOs), while Diatech willhandle sales to radiopharmacies.

The deal comes at a crucial time for Diatech. The company wasfounded in 1990 to commercialize its technology that links technetiumradioisotopes to peptides, which home in on targeted receptorsin the body (SCAN 6/30/93). Diatech is beginning to shift froman R&D phase to product commercialization, a transition thathas proved difficult for a number of other biotechnology firms.Nycomed's investment gives Diatech a substantial cushion to absorbany upcoming bumps.

Diatech has five major imaging products, which it has dubbedTechtides, in clinical trials. The company described its progresswith the agents at the Society of Nuclear Medicine meeting inJune (SCAN 7/6/95). The agents are:

• P280, for imaging acute deep vein thrombosis, in phase IIIclinical trials;

• P748, for detection of pulmonary embolism, in phase I/IItrials;

• P829, a tumor imaging agent, in phase I/II trials;

• P483H, an infection imaging agent, in phase I trials; and

• P215, for imaging atherosclerotic plaque, which has completedphase II trials.

Diatech is also investigating a therapy product, Tin 117m-DTPA,for palliation of pain in patients whose cancer has metastasizedto the bone. The product would compete with products such as Amersham'sMetastron and Cytogen's Quadramet, which will be marketed by DuPont.

Diatech chose to develop a wide range of agents simultaneouslyto avoid putting all its R&D eggs in one basket, accordingto Richard Dean, president and CEO.

"We wanted to proceed with enough products so that noone product could cause us any difficulty if it bombed in theclinic," Dean said. "That was from observing other start-upcompanies that are really hanging too much on one product."

Funding for Diatech. The Nycomed investment will provide Diatechwith the funds to get its products through the development pipelineand put the company on the road to profitability, Dean said. Diatechchose to retain some U.S. marketing rights because it wanted accessto direct sales in the lucrative U.S. market, but realized itwould have to cede some rights to Nycomed to avoid the expenseof building a large sales organization while waiting for Foodand Drug Administration approval of its products.

"This allows us to build a sales organization in a gradualmanner rather than in a precipitous manner, when we are in thesensitive process of product introductions. This has been a problemfor a lot of companies," Dean said. "We don't have toget a big sales force all in place and ready to go prior to theapprovals, which burns a lot of cash."

Diatech expects to file for regulatory approval of P280, itsfirst commercial product, in mid-1996. It will be able to filenew drug applications for its products (NDAs) rather than themore time-consuming product license applications (PLAs), whichare required of monoclonal-antibody-based imaging agents.

The Nycomed investment complements $1.6 million in grant moneyDiatech has received in recent months. The company has aggressivelypursued such grants, according to Dean.

"That is a huge amount for a small company. It helps usbe competitive in the research area," Dean said.

For Nycomed, its investment in Diatech marks the U.S. organization'sfirst step into the radiopharmaceutical market, where it willcompete with established players like Mallinckrodt Medical, DuPont Merck Pharmaceutical and Amersham International. Nycomedis well known for its x-ray and MRI contrast agents. Its parentcompany, Hafslund Nycomed of Oslo, Norway, has done some workin the radiopharmaceutical field, according to spokesperson ChristopherKillbane.

Nycomed chose Diatech as its first partner in the radiopharmaceuticalindustry because it was impressed with the quality of the firm'sproducts, said Eric Cameron, senior vice president of corporatecommunications for Nycomed. Nycomed may make additional investmentsin the radiopharmaceutical industry if this one proves fruitful.

"We looked at Diatech's products, we evaluated them andwe found that they were first-rate, very promising products thatwould meet our demands and needs to be a central player in thisfield," Cameron said. "If the potential turns out tobe the potential we believe it is, we will broaden our scope andexpand in this field."