Forest, Cypress in $250 mln fibromyalgia drug deal

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Reuters

UPDATE - Forest, Cypress in $250 mln fibromyalgia drug deal

Friday January 9, 4:43 pm ET

By Ransdell Pierson

(Adds closing share prices)

NEW YORK, Jan 9 (Reuters) - Forest Laboratories Inc. (NYSE:FRX - News),

which sells two popular depression drugs, on Friday said it would pay up to

$250 million plus royalties to sell a European depression medicine in the

United States as a treatment for the pain syndrome fibromyalgia.

The deal with Cypress Bioscience Inc. (NasdaqSC:CYPB - News) would allow New

York-based Forest to co-market the drug, milnacipran, in exchange for

undisclosed sales royalties and upfront and milestone payments of between

$200 million and $250 million.

The medicine is in late-stage clinical trials for fibromyalgia, which could

be completed in 2006 and support a U.S. marketing application for the drug

that year, the partners said.

Fibromyalgia is the term for a group of related disorders characterized by

pain and stiffness in muscles, tendons and ligaments.

Milnacipran has been sold for six years in Europe and Japan, usually under

the brand name Ixel, as a treatment for depression.

Although its annual sales now total less than $100 million, Cypress Chief

Executive Jay Kranzler told Reuters he believes Forest has the skills to

make it a big seller for fibromyalgia.

" Forest has shown itself to be an incredibly good marketer of central

nervous system drugs, " Kranzler said.

Like Wyeth's (NYSE:WYE - News) popular depression drug Effexor XR and the

antidepressant Cymbalta being developed by Eli Lilly and Co. (NYSE:LLY -

News), milnacipran works by making the messenger chemicals norepinephrine

and serotonin more available to brain cells.

By contrast, Forest's depression drugs Lexapro and Celexa, which had

combined fiscal third-quarter sales of almost $600 million, work by

maximizing only serotonin.

Cypress licensed milnacipran in 2001 from privately held French drugmaker

Pierre Fabre Medicament, with rights to develop it for any use in the United

States and Canada.

Ian on, a drug analyst for SG Cowen Securities, said he believes

Forest has long-term plans to also help Cypress develop the medicine as a

U.S. treatment for depression, and thereby modernize Forest's own line of

highly profitable antidepressants.

" They're pretty quiet about the depression intentions here but I think

Forest really does intend to develop it for depression in the United States

as an insurance policy against (Lilly's) Cymbalta, " on said.

Fibromyalgia is a little-understood condition that Cypress said affects up

to 12 million Americans and for which no drugs are currently approved. It

tends to be far more common in women than men.

Forest would pay all future costs of developing the medicine and be

responsible for marketing the drug, although Cypress will have the option to

use its own sales force to make up to 25 percent of visits to doctors'

offices.

Shares of Forest, which separately on Friday announced it would beat Wall

Street earnings forecasts for its fiscal third quarter, closed up $2.64, or

3.8 percent, at $71.64, on the New York Stock Exchange (News - Websites) .

Cypress fell $1.21, or 7.7 percent, to $14.50, on the Nasdaq. The stock has

traded in the past year between $2.16 and $16.