Genelabs Technologies, Inc. and Tanabe Seiyaku Co., Ltd. announced that they have entered into a collaboration and license agreement for the Japanese rights to prasterone (Prestara; Anastar; GL701), Genelabs' investigational drug for the chronic autoimmune disease systemic lupus erythematosus (SLE or lupus).

Under the terms of the agreement, Genelabs granted Tanabe an exclusive license to prasterone in Japan. Tanabe will pay Genelabs milestone payments and fees of up to $12 million, including a $2 million non-refundable initial license fee. The milestone payments are payable through the time of National Health Insurance (NHI) price listing in Japan, based on pre-determined development goals. In addition, Genelabs is entitled to receive royalties on the net sales of prasterone in Japan. Tanabe is responsible for obtaining regulatory approval of prasterone in Japan, including conducting and funding any development work required.

In addition to the milestone payments, license fee and royalties, Tanabe has also agreed to purchase 818,897 shares of Genelabs common stock for an aggregate purchase price of $2.6 million, or $3.175 per share, which represents a 15 per cent premium to the average of the closing prices for 10 days prior to execution of the agreement.

"Tanabe is an excellent partner for the development and commercialization of prasterone in Japan," commented Irene Chow, chairman and CEO of Genelabs. "They have proven drug development capabilities in Japan, a well-known sales and marketing organization specifically focused on specialty pharmaceuticals and a growing franchise in rheumatic diseases.

"We are extremely pleased to enter into this collaboration and license arrangement with Genelabs for prasterone," said Natsuki Hayama, president of Tanabe. "We believe there will be significant demand for a new lupus drug, and that the current lupus treatments are clearly inadequate. Prasterone thus represents a significant market opportunity for us. We further expect that success in the prasterone programme will complement our growing rheumatology franchise, which includes Remicade for rheumatoid arthritis. This alliance combines the prasterone development knowledge of Genelabs with Tanabe's longstanding drug development expertise in Japan and its proven sales and marketing resources, which should maximize value to both companies. We are eager to begin working with Genelabs in this endeavor."