PPD, Inc. and Syrrx, Inc. reported the signing of agreements to jointly develop and commercialize Syrrx-designed human dipeptidyl peptidase IV (DP4) inhibitors as drug products for the treatment of type 2 diabetes and other major human diseases. PPD and Syrrx expect to advance multiple DP4 inhibitors into preclinical and clinical studies with the objective of developing a drug product with a once or twice-a-day oral dosing profile.

Under the terms of the agreements, PPD made a $25 million equity investment in Syrrx convertible preferred stock. PPD also will provide preclinical and clinical development resources and expertise for the collaboration, and will fund the majority of preclinical and clinical studies through Phase IIb development of selected DP4 inhibitors. PPD and Syrrx have agreed to share equally the costs of Phase III development. In addition, PPD will make milestone payments to Syrrx upon the occurrence of certain clinical and regulatory events. In the event of approval to market a drug product, PPD and Syrrx will share equally the profits from drug sales.

Studies to date indicate that DP4 plays an important role in regulating insulin levels in the body. In early-stage clinical trials conducted primarily by large pharmaceutical companies, orally delivered DP4 inhibitors reduced blood glucose and increased insulin response in patients. These data indicate that small-molecule inhibitors that target DP4 could be potential treatments for major human diseases including type 2 diabetes, obesity, high cholesterol and other forms of metabolic syndrome.

Syrrx first reported the atomic level structure details of DP4 in October 2002, and since that time has used the information to design a collection of novel small-molecule DP4 inhibitors. Syrrx believes these compounds may have advantages over currently known DP4 inhibitors undergoing clinical evaluation. Initial efforts of the PPD-Syrrx collaboration will focus on further preclinical studies of these compounds, potentially leading to the initiation of Phase I clinical trials.

"The selection of several DP4 clinical candidates completes Syrrx's transition from a platform company to one that can make potentially meaningful therapeutics," said Stephen W. Kaldor, Syrrx president and chief scientific officer. "I am particularly excited about the speed of our research. We have designed multiple high quality clinical candidates in less than two years and as part of our ongoing research program, we are creating a pipeline of potential DP4 clinical candidates to maximize our chances of capturing the largest possible share of this substantial market opportunity. We look forward to collaborating with PPD on the development of multiple promising candidates."

The PPD-Syrrx collaboration reflects PPD's goal of building a balanced portfolio of partnered compounds that complements the wide variety of integrated discovery and development services that PPD already provides. The alliance is strategic to the medium and long-term goals of PPD. In the near-term, PPD and Syrrx will conduct further preclinical studies of DP4 inhibitors and expect to file an investigational new drug application in the second half of 2004. Based on this objective and the current development plan, PPD anticipates that the earnings dilution associated with its share of the costs during 2004 will be in the range of $.06 to $.08 per diluted share. PPD expects to fund its share of these development costs from existing cash resources.

"PPD entered this collaboration because of Syrrx's promising DP4 inhibitor collection and rational drug discovery capabilities," said Fred Eshelman, chief executive officer of PPD. "We believe this compound partnering transaction will capitalize on our global development expertise and strong balance sheet as well as Syrrx's drug discovery engine. While expected to generate earnings dilution, the collaboration offers PPD the potential for enhanced earnings per share gains in the long-term."

According to the American Diabetes Association, almost 17 million Americans have diabetes. This accounts for approximately six per cent of the entire U.S. population, including 20 per cent of people over the age of 65. Type 2 diabetes accounts for approximately 90 per cent of the diabetes population, with approximately one million new cases of type 2 diabetes diagnosed each year. All these numbers double if pre-diabetics are included. Despite increasing maturity and a high level of generics, the global anti-diabetic market achieved sales of nearly $12.4 billion in 2002.

Diabetes is a lifelong, chronic and often debilitating disease that develops when the body cannot effectively control the level of sugar (glucose) in the blood stream. Most people with type 2 diabetes make insulin, which helps control blood glucose levels, but their bodies are not able to use the insulin effectively. Inhibitors of DP4 have been shown to block the destruction of glucagon-like peptide-1 (GLP-1), which is an important protein the body makes to help insulin work properly. By treating small-molecule inhibitors of DP4, GLP-1 can be spared, blood glucose can be lowered and insulin response can be improved.