£8.1m injection as Gala firm gets US go-ahead for male menopause drug

ProStrakan Board, 'London  - 21st Jan 2009''John Sturrock '07973 254 298
ProStrakan Board, 'London - 21st Jan 2009''John Sturrock '07973 254 298

THERE was a New Year boost for staff and shareholders of Galashiels pharmaceutical company ProStrakan with the announcement last week that its drug that treats the symptoms of the male menopause can be sold in the United States.

The news that the product – Fortesta gel – will be launched stateside early this year saw the share price jump by almost 18 per cent to 105p at close of trading on Thursday and stabilise at about 103p when the money markets reopened this week.

It represents a significant change of fortune for the speciality drugs company which, in September, predicted that £5million would be wiped off profits because of production difficulties in the US with Sancuso, a granisteron patch used to treat nausea in chemotherapy patients.

That setback, allied to earlier product delays and the resignation of chief executive Wilson Totten, who joined the Galabank Business Park-based company in 2004, sent the shares tumbling by more than 30 per cent.

But now the US Food and Drug Administration (FDA) has given the green light for the sale Fortesta, which is known as Tostran in Europe where it accounted for about £4million of ProStrakan’s sales in the first half of this financial year.

The European market is a tenth of the size of that in America. There, an estimated 14 million men are believed to have irregularly low testosterone levels, of whom only about 1.3 million currently receive treatment. Some analyists reckon the market for such therapies in the US is worth more than $1.1billion.

It is no surprise that drug companies are seeking to cash in and it appears that ProStrackan has stolen a march with its testosterone replacement gel for males aged 40 or over with so-called hypogonadism which is associated with low energy levels, hair loss, weight gain, osteoporosis and erectile dysfunction.

Fortesta is applied with one finger to each thigh, which prevents it from passing on to other people such as children.

Up to now, this has been one of the main concerns of the FDA after it was reported that exposure could cause aggressive behaviour and premature development in children.

Fortesta will be launched by ProStakan’s partner, Endo Pharmaceuticals, which owns the marketing rights to the product in the US.

The approval from the FDA has triggered an immediate so-called milestone payment to ProStrakan of $12.1million (£8.1m) from Endo, though the overall licensing deal could be worth up to $210million to the Galashiels firm if Fortesta meets certain sales targets.

Prostrakan’s acting chief executive Peter Allen, who took over the helm in September, has highlighted the profit potential beyond these payments.

“The milestones are obviously very helpful and boost our cashflow, but for me the more relevant aspect will be the anuual income we get from product sales,” said Mr Allen.

The milestone payment from Endo means ProStrakan will ditch plans to sell its Xomolix nausea treatment to Canada’s Paladin Labs. However, the two companies will go ahead with other aspects of a “stategic alliance” that was announced on December 16, subject to the approval of ProStrakan shareholders at a general meeting tomorrow.

They will be asked to approve a deal in which Paladin will get exclusive licences for certain products in new markets in exchange for taking on ProStrakan’s £50million secured debt facility.

Meanwhile, ProStrakan remains the subject of takeover speculation after it revealed in November that its board had received “expressions of interest in the company and its assets”.

“The process of evaluating these expressions of interest is at a preliminary stage and we cannot provide further information in relation to any potential offer,” said ProStrakan’s communications director Callum Spreng this week.