Schering-Plough has licensed worldwide rights to a new oral hepatitis B

drug being developed by Valeant Pharmaceuticals and Metabasis

Therapeutics.

Pradefovir, an investigational oral antiviral compound currently in Phase

II trials for the treatment of chronic hepatitis B, was licensed by

Valeant from Metabasis in 2000. Under the terms of the deal, S-P will make

an upfront payment of $19.2 million to Valeant and $1.8 million to

Metabasis and will pay up to an additional $90 million depending on

certain development and regulatory milestones to Valeant and Metabasis

($65 million of which will go the former firm). S-P will also pay royalties

in the event pradefovir hits the market.

Paul Laikind, Metabasis’ chief executive, was extremely enthusiastic about

the prospects for the compound, saying that “based on the clinical results

to date, we believe pradefovir’s profile could make it best-in-class

should it be approved." S-P was a little more considered, saying that the

compound “has the potential to offer improved treatment options for

patients with chronic hepatitis B,” which affects some 400 million people

worldwide.

The deal is a real boost for Valeant, which recently announced that its

hepatitis C drug Viramidine (taribavirin) was no better than a standard

therapy in a second Phase III trial.

S-P is already an established player in the treatment of hepatitis.

Peg-Intron (peginterferon alfa) for hepatitis C had third-quarter sales of

$206 million, up 11%, while Rebetol (ribavirin) still makes a useful

contribution to the firm’s coffers, despite suffering from generic

competition. S-P also has an hepatitis protease inhibitor in Phase II

development which it says could eventually become a billion-dollar drug.

* S-P also benefited from the news that Moody’s Investors Service has

upped its outlook for the firm to ‘positive’ from ‘stable,’ due to growth

in several products, improved cash flow and improvements in the company’s litigation profile.