Diamyd Medical sells off nerve-targeted delivery unit

Swedish company Diamyd Medical has sold off its U.S. subsidiary, Diamyd, and its nerve-delivery system, designed to deliver drugs to treat pain directly to the nervous system. The buyer is Periphagen Holdings, a company created and owned by the Diamyd management.

Periphagen Holdings gains the rights to Diamyd's Nerve Targeting Drug Delivery System (NTDDS) technology in return for $1, shares equivalent to a 10% holding in Periphagen Holdings, and up to $10 million, primarily in milestone payments. Diamyd Medical will also receive 10% of payments that Periphagen Holdings may receive from future partners, as well as royalties on future sales of NTDDS-based drugs.

Products in the NTDDS pipeline focus on pain relief and include NP2 Enkephalin, which is in a placebo-controlled Phase II study for cancer pain in the U.S. This is based on a modified herpes simplex virus (HSV) that delivers the gene for enkephalin. NG2 GAD, for diabetes pain, and NE2 Endomorphin, for chronic pain, are both in preclinical development.

The divestment will improve Diamyd Medical's operating profit/loss by about SEK18 million (about $2.7 million) during fiscal year 2012/13. This is likely to be a help to the company--in 2011, Janssen Pharmaceuticals, a subsidiary of Johnson & Johnson ($JNJ), terminated a diabetes deal worth $625 million with Diamyd Medical for the Phase I drug GAD65 when it fared no better than placebo in a clinical trial.

"The divestment immediately and significantly reduces Diamyd Medical's costs, whilst we retain the right to share in future successes of the NTDDS platform. The development projects will receive full focus from their dedicated new owners, which makes it a great solution for both parties as well as for the NTDDS platform," says Peter Zerhouni, president and CEO of Diamyd Medical.

The agreement is subject to approval from Diamyd Medical's shareholders at an extraordinary general meeting Oct. 30.

- read the press release