Denmark’s Leo Pharma has signed a deal with the US biotech Virobay to develop an investigational oral treatment for psoriasis which "has the potential to be the first on the market with its specific mode of action".

The agreement will see Leo make an upfront payment of $7 million, followed by milestones totalling up to $300 million, plus tiered royalties. The compound is currently being tested in preclinical studies and will go into Phase I in the fourth quarter of 2012.

Leo noted that a limited number of oral psoriasis treatments are already on the market, "but they have potential drawbacks in terms of adverse effects and a need for monitoring". As such, "a safe and convenient oral treatment thus addresses a significant unmet patient need".

Virobay chief executive Robert Booth said collaborating with Leo "makes it possible for us to conduct testing in a clinical program with world-leading dermatologists". He noted that the compound's possible indications "cover a range of dermatological diseases and co-morbidities [but] first and foremost, we hope to develop a safe oral treatment for the 125 million or so people worldwide who suffer from psoriasis".

The Ballerup-based group said the deal is the latest milestone in its "ambitious global growth strategy". More acquisitions and in-licensing deals are expected, and Kim Kjoller, head of global development at Leo, said that "we are actively seeking out new opportunities to expand our pipeline".