Endo Pharmaceuticals Holdings Inc. has announced that its wholly owned subsidiary, Endo Pharmaceuticals Inc., has acquired all of the outstanding stock of RxKinetix, Inc., a privately held company headquartered in Boulder, Colo., that develops new formulations of approved products for oral mucositis and other supportive care oncology conditions. The company and its 21 employees will now operate, as part of a newly created wholly owned subsidiary of Endo Pharmaceuticals Inc.

The transaction includes an up-front payment of up to $20 million, with the potential for up to an additional $95 million in earn-out payments based on clinical development and regulatory milestones. The acquisition is expected to be dilutive to Endo's 2006 adjusted earnings by approximately $0.02 per adjusted diluted share based on incremental research and development expense. This excludes transaction-related expenses and the one-time charge for the write-off of acquired in-process R&D expense of approximately $26 million, subject to final purchase price allocation, to be taken in the fourth quarter of 2006.

RxKinetix's lead product is RK-0202, a topical oral-rinse with the active ingredient formulated in its proprietary ProGelz drug delivery platform. RK-0202 is in clinical phase II for the prevention of oral mucositis, painful mouth sores that often occur in cancer patients undergoing radiation and chemotherapeutic treatment. RxKinetix also has other products in early- stage development based on the ProGelz technology.

"The acquisition of RxKinetix is consistent with our strategic goal of expanding into therapeutic areas that are complementary to pain," said Peter A. Lankau, president and CEO of Endo. "Endo has expanded its commercial presence among oncologists with the recent launch of Opana ER and Opana tablets, and Rapinyl, our quick-dissolving fentanyl tablet in development for breakthrough cancer pain, is currently in phase III trials. A product such asRK-0202, if approved, would be a natural extension of this franchise, and we look forward to working with our new colleagues in the development of this and other cancer-related palliative care treatments in the RxKinetix pipeline. We intend to continue to seek similar specialist-focused opportunities in supportive care oncology and other complementary therapeutic areas."

Lankau added that Endo plans to conduct additional phase II trials of RK- 0202 to continue to characterise the clinical profile of the product in the intended patient population -- head and neck cancer patients undergoing combination treatment of radiation and chemotherapy.

During the course of high-dose cancer therapy and bone marrow transplantation, patients often develop painful and debilitating oral inflammation, or mucositis, in the mouth. The resulting weight loss, dehydration and, in some cases, infection often lead to dose-limitation of chemotherapy and radiation therapy, and contribute considerably to cancer and transplant-related morbidity and mortality. Further, these side effects add to related medical costs by prolonging hospital stays, increasing antibiotic, fluid, and analgesic use, and requiring patients to receive parenteral nutritional support. Of the estimated 900,000 chemotherapy-treated patients in the US, 400,000 may develop the debilitating complications of oral mucositis as a result of their treatments.