Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Santarus soars on distribution and licensing agreement for type 2 diabetic drug

|Includes: Santarus, Inc. (SNTS)

Specialty biopharmaceutical company Santarus (NASDAQ: SNTS), along with pharma and biotech businesses S2 Therapeutics and VeroScience have entered into a distribution and license agreement, granting Santarus exclusive rights to manufacture and commercialize CYCLOSET  tablets in the U.S, a prescription drug that works to improve blood sugar level control in adults with type 2 diabetes alongside diet and exercise.

The drug, which was approved by the US FDA, works both by itself and in combination with other oral anti-diabetic agents.

Under the terms of the distribution and license agreement, Santarus is paying an upfront fee totaling $5 million to S2 Therapeutics and VeroScience.

Santarus will then pay a product royalty to S2 Therapeutics and VeroScience of 35% of the gross margin associated with net sales of CYCLOSET, up to $100 million of cumulative total gross margin, increasing to 40% thereafter.

CYCLOSET is the first FDA-approved drug for patients with type 2 diabetes to target the activity of dopamine, a chemical messenger between neurons within the central nervous system.

In clinical studies, once daily, morning administration of CYCLOSET improved control of blood glucose levels, without increasing cardiovascular event risk.

The company expects to commercially launch CYCLOSET in November this year.

"Given its novel biological activity, positive impact on glucose control and cardiovascular safe profile, we believe CYCLOSET represents an attractive new option for the treatment of patients with type 2 diabetes," said president and CEO of Santarus Gerald T. Proehl.

CYCLOSET is the first and only drug for the treatment of type 2 diabetes to date that was approved subsequent to the FDA's Guidance to Industry titled, "Diabetes Mellitus -- evaluating cardiovascular risk in new antidiabetic therapies to treat type 2 diabetes".

The FDA Guidance, issued in December 2008, requires clinical studies to demonstrate that medicines for diabetes do not increase cardiovascular risk, especially in patients with existing or potential heart problems.

The drug met the recommendations in this guidance relative to study design and outcome with demonstrated cardiovascular safety pre-approval, said the company.

A joint steering committee with representatives from the three companies has been formed to share information regarding the development of CYCLOSET, its manufacturing and promotion efforts in the U.S.

According to the 2007 National Diabetes Fact Sheet, diabetes is the seventh deadliest disease in the U.S. It affects an estimated 24 million Americans and its incidence is increasing by approximately 1.6 million cases each year in the U.S. alone.

Approximately 90-95% of people with diabetes suffer from type 2 diabetes.

Santarus is focused on acquiring, developing and commercializing proprietary products that address the needs of patients treated by gastroenterologists, endocrinologists and other physicians.

The company was up more than 14% on Thursday, trading at $2.54 on the Nasdaq as of 1:45pm ET, reaching highs of $2.9 earlier in the day.

Disclosure: no positions