Santarus Inc. said Wednesday it bought the rights to make and sell a new type 2 diabetes drug from two other drugmakers, and its shares surged in Thursday trading.
The San Diego-based Santarus said Cycloset is the only type 2 diabetes drug that has been approved since the Food and Drug Administration issued new guidelines in 2008 that were intended to limit the cardiovascular risks associated with some diabetes treatments. The drug is also called bromocriptine and is designed to be taken in the morning to help control spiking blood sugar levels after meals.
Type 2 diabetes is a disorder in which the body does not produce enough insulin or its cells do not respond to insulin. Without it, the body can't use glucose for energy, and glucose builds up in the blood. Type 2 diabetes is the most common kind of diabetes and is often linked to obesity.
Shares of Santarus climbed 40 cents, or 18 percent, to $2.62 in midday trading. Earlier the stock rose as much as 30.6 percent to $2.90.
Santarus said it will pay $5 million upfront for the U.S. rights to Cycloset, and it plans to start selling the drug in November. The drug's developers, S2 Therapeutics Inc. and VeroScience LLC, will also receive some of the gross profits on sales by Santarus.
Cycloset received FDA approval in 2009, but it has never reached the market. Santarus said it believes the patents on the drug will expire in 2014 or early 2015.
Santarus also markets the diabetes drug, Glumetza, in the U.S. In a conference call, the company said Glumetza and Cycloset could reach as much as $300 million to $400 million in peak annual sales. That will help the company make up for declining revenue from its acid reflux drug, Zergerid, which is now facing generic competition.
The company licensed Glumetza from DepoMed Inc.
Cycloset is not associated with problems such as heart attack and stroke, Santarus said. It is designed to improve blood sugar control in adults with type 2 diabetes, along with diet and exercise. It can be used on its own or in combination with other oral drugs for diabetes.
Shares of Santarus have traded from $2.09 to $5.82 over the last year. The stock plunged in April after the company said a federal judge found some of the patents on Zegerid were not valid. Par Pharmaceutical Cos. started selling a generic version of Zegerid in July.
Zegerid and Glumetza are Santarus' only marketed products, although it is developing other drugs through partnerships or on its own.
Under the license agreement, Santarus will pay S2 and VeroScience 35 percent of its gross profit on Cycloset on the first $100 million in gross sales. It will pay 40 percent on any sales above that total. S2 and VeroScience are responsible for any other royalties and for post-approval commitments.
S2 has the global license on Cycloset, and it is based in Bristol, Tenn. VeroScience is based in Tiverton, R.I., and owns the regulatory application and related technology. Both companies are privately held.