Forbes Medi-Tech Inc. has signed an agreement to acquire 100 per cent of TheraPei Pharmaceuticals, Inc.(TheraPei) of San Diego, California. TheraPei is a privately held company formed with technology 'spun-out' of Sequenom, Inc. focused on developing novel pharmaceuticals directed at the underlying causes of type II diabetes and related metabolic diseases.

Forbes will further develop TheraPei technologies along with Forbes' existing technologies with R&D based in San Diego and Forbes' clinical development team in Vancouver. TheraPei's founder, Dr. John Nestor, will be appointed as the chief scientific officer of Forbes on closing, a Forbes press release said.

Consideration for the acquisition will be made on a staged basis commensurate with development of the newly acquired technologies. The acquisition consideration will consist of a small upfront payment, the issuance of common shares not to exceed 150,000 on closing plus future consideration consisting of milestone payments, licensing revenue and/or royalties. Potential milestone payments may reach up to US$50 million based upon the successful completion of key clinical development steps. Dr. Nestor is the majority shareholder of TheraPei and as such, will receive the majority of the acquisition consideration. Sequenom holds a minority shareholder interest in TheraPei.

All consideration shall be paid as to a minimum of 80 per centn shares of Forbes, subject to regulatory and shareholder approval as required, and the balance, up to 20 per cent. If regulatory or shareholder approval is not forthcoming, Forbes shall pay cash in lieu of the issuance of shares. Forbes may also elect to pay cash in lieu of the issuance of shares in certain circumstances.

"With Forbes' lead compound, FM-VP4, nearing completion of Phase II in the US, the Company has the development team and capabilities required to fully realize the significant potential of TheraPei's novel drug candidates," noted Charles Butt, President and CEO, Forbes Medi-Tech Inc. "Dr. Nestor's extensive track record of successful drug discovery and development will help us optimize Forbes' existing FM-VPx library."

The TheraPei Intellectual Property will add diversity to Forbes' FM-VPx drug development platform to include four new technologies: a series of novel peptides designed for once daily administration aimed at stimulating insulin secretion; compounds from this series are also being developed for potential anti-inflammatory effects; an earlier stage discovery program that may have important applications in both diabetes and obesity through inhibition of ACC2; and another discovery program related to SPT inhibition targeting anti-inflammation.

The lead preclinical product is a peptide that is targeted to be a long acting VPAC2 selective agonist designed for once daily administration to stimulate insulin secretion. These analogues are particularly promising based on pre-clinical study results to date demonstrating a beneficial effect through lowering glucose in blood, which could benefit a large diabetic patient population.

Diabetes represents a significant market opportunity with annual sales expected to reach about $25 billion by 2011 according to DataMonitor. It is believed that VPAC2 selective agonists will target insulin secretion via a different pathway than BYETTA (launched in 2005, with forecasted sales of $1 billion in 2007) leading to a differentiated product profile in this increasingly important class. The same agonists are also generally believed to play a role as inflammatory mediators in a number of other physiological conditions, creating a much broader utility for this technology.