Schering pumps cash into Epix to market MS-325

Three-way partnership powers behind former AngioMark

Three pharmaceutical companies have decided to pool their smarts, cash, and name recognition to see each other through the stiff regulatory process and expensive clinical trial periods of contrast agent development.

Epix Medical, Mallinckrodt, and Berlex (the U.S. subsidiary of Germany’s Schering) jointly announced a series of agreements covering Epix Medical’s MS-325, which was formerly licensed by Mallinckrodt as AngioMark.

MS-325 is now in phase III clinical trials, and Epix expects to complete patient trial enrollment for the agent in the first half of 2001, said Michael Webb, CEO of the small Massachusetts-based pharmaceutical development company.

Epix and Mallinckrodt of St. Louis struck up their agreement two years ago. AngioMark will be used with MR angiography for the visualization of arteries and veins. Mallinckrodt and Epix hope the agent will improve the diagnosis of atherosclerotic occlusive disease (SCAN 8/5/98). The agent is designed to provide a safe, minimally invasive alternative to x-ray angiography.

Company officials from Mallinckrodt and Epix said the partnership enables these companies to survive in the expensive and often tough contrast agent industry.

“There was no way we could do it by ourselves. We couldn’t do it with one (other) company; we had to do it with two companies,” Webb said.

As a development-stage company, Epix has no commercial products, relying on licensing fees and collaborative agreements for revenue. For fiscal 1998, Epix incurred losses of $28.4 million (Diagnostic Imaging 100, Winter 1999). Mallinckrodt, on the other hand, has a few contrast agents on the market, but the company has been the subject of long and costly legal battles over patent infringement issues (SCAN 5/24/00).

Mallinckrodt spokesperson Barbara Abbett said the agreement unites three important skills: Epix’s research capabilities, Schering’s experience with pharmaceuticals and MR, and Mallinckrodt’s manufacturing skills.

“What is critical is the stiff regulatory and economic environment we are doing business in. It just takes more dollars to bring a product through the research and development stage and to the market,” Abbett said.

Berlex and Schering did not respond to further questions about the deal.

Under the agreement, Schering will pay Epix a $10 million fee up-front and $20 million in milestone payments for the exclusive right to codevelop and sell MS-325 worldwide, except in Japan. Epix will complete the clinical trials and file for FDA approval in the U.S. and Schering will lead the trials in Europe.

“We are hoping that (Schering’s) experience in Europe will accelerate the time period of the trials,” Webb said.

Epix and Schering will split the clinical development costs of MS-325 equally, and Mallinckrodt will assume responsibility for manufacturing the agent for clinical development and commercial use. Epix and Schering will share equally in operating profits in the U.S., while Schering will pay Epix a royalty on gross profits everywhere else they sell it. Mallinckrodt will earn profits on the manufacture of MS-325 and will participate in profit sharing with Epix as well. The percentage of each company’s royalties is not being disclosed, Abbett said.

In a separate agreement, Schering and Epix have agreed to codevelop and commercialize another Epix MR cardiovascular contrast agent besides MS-325. Epix also has the right to obtain a royalty from the worldwide sales of Schering’s SHU555C agent, and may exercise this right through payment of an up-front fee upon marketing approval of SHU555C and MS-325. In addition, Epix acquired exclusive rights to codevelop and share profits on Schering’s Gadomer-17. After trials on this product are completed, Epix may exercise its right through payment of an up-front fee and further milestone payments. Epix and Schering will share equally in development costs and profits for Gadomer-17.

Abbett of Mallinckrodt said her company has another MR product on the market called Gastromark.

“We can continue to be a player in the blood pool segment, but not have to worry about going it on our own,” Abbett said.

Webb of Epix said he hopes the three-way agreement stays intact for the life of the product, which is estimated to be about 15 years. If MS-325 doesn’t capture the market and become a financial success, Webb said there is language in the agreement that will let Schering out of the deal. Webb said he is hoping that doesn’t happen. MS-325 is an effective product because it illuminates the veins for an hour and a half, while other MR cardiography contrasts leak out in 30 seconds, he said.

“When you have paid a lot of money to get in, the incentive to drop out is very low,” he said.