Merck KGaA and Kos Pharmaceuticals Inc announced a manufacturing and licensing agreement for Niaspan and Advicor, two products internally developed by Kos for the treatment of cholesterol disorders. Pursuant to the agreement, Merck will receive exclusive international commercialization rights to Niaspan and Advicor outside North America and Japan.

Niaspan and Advicor are two highly differentiated lipid-modifying products that participate in the large and rapidly growing cholesterol market. Both products have already been approved by the U.S. Food and Drug Administration (FDA) and have been filed for approval in the U.K., to be followed by other European Countries via the Mutual Recognition Procedure.

Under terms of the agreement, Merck will provide licensing and milestone payments to Kos of up to $61 million, including $15 million of upfront payments. Milestone payments are dependent on the achievement of certain regulatory approvals and sales thresholds.

Kos will also receive 25% of net sales of the products in the territory, which includes the cost of manufacture. Merck will be responsible for conducting Phase IV clinical studies and promotional investments while Kos is responsible for obtaining initial marketing authorization in all EU countries. Both products will be manufactured and supplied by Kos. Kos will be responsible for reimbursement of a portion of the upfront payment if regulatory approval is not granted beyond the U.K., the Reference Member State.

Niaspan (extended-release niacin), the first and only once-daily niacin product ever approved by the FDA for treatment of multiple lipid disorders, was introduced to the U.S. market in 1997. The drug continues to experience rapid growth, with sales in the U.S. for the 12-month period ending June 30, 2002 of $114 million, reflecting a 72% increase from the comparable period a year ago.

Advicor (extended-release niacin/lovastatin), the first FDA-approved, dual-component therapy for cholesterol modulation, was launched in the U.S. in February 2002 and achieved $9 million in net sales in the first five months on the market. Advicor and Niaspan currently represent a U.S. market share of 3.7% of the total cholesterol market for new retail prescriptions. The overall cholesterol market in the U.S. is projected to be $12 billion in 2002.

"The success of Niaspan and Advicor in the United States made a very compelling case to partner with Kos," said Matthew Emmens, Head of Ethical Pharmaceuticals and Member of the Executive Board of Merck KGaA. "Our goal is to deliver innovative and successful therapies to patients world-wide, and Advicor and Niaspan address critical unmet needs in the cardio-metabolic area.

The markets covered by the agreement represent significant opportunities for Merck and Kos. More than 81 million patients in Europe - nearly twice as many as in the United States - live with dyslipidemia. The European cholesterol market exceeded $3.5 billion in 2001, and is expected to grow to approximately $10 billion by 2007.