Q-Med AB and Smith & Nephew Orthopaedics Trauma & Clinical Therapies announced that they have formed a strategic alliance to develop and commercialize Q-Med's proprietary technology for the production of stabilized non-animal hyaluronic acid, Nasha for orthopeadic uses. The purpose of the transaction is to explore Q-Med's versatile technology for the management of osteoarthritis (OA) in joints and to explore other orthopaedic uses and diseases.

The two companies have entered into a licensing and supply agreement under which Q-Med AB has granted Smith & Nephew Inc. the global exclusive right to market, sell and distribute Durolane and other products intended for the management of orthopedic conditions and diseases. Q-Med will manufacture and supply all products developed under this transaction. Smith & Nephew will focus on, and bear the costs for, the clinical development, registration and commercialization of new products worldwide.

Durolane is the first and only single-injection hyaluronic acid therapy for the treatment of OA of the hip and knee. Durolane has been approved for the treatment of OA in the knee in Europe since 2001, and for the treatment of OA in both the knee and hip in Europe and Canada since 2004. More than 100,000 patients have been treated with Durolane. Q-Med submitted a Pre-Market Approval (PMA) application to the US Food and Drug Administration (FDA) in March 2006.

Under the terms of the agreements the major financial component will be royalties on product sales worldwide. The royalty rate will vary depending on the commercial conditions in the markets in which Smith & Nephew will promote the products. In addition to the royalty payments, Q-Med has received an upfront payment of USD 10 million, and will receive four additional milestone payments, which could total USD 60 million, related to the US approval and commercialization of Durolane.

Mark Augusti, President, Smith & Nephew Orthopaedic Trauma and Clinical Therapies, commented, "The joint fluid therapy market is growing quickly, driven by increased patient awareness and demand for non-surgical alternatives for the treatment of osteoarthritis. This strategic transaction with Q-Med enhances Smith & Nephew's presence in this market, and underscores our commitment to the development and commercialization of effective therapies to help patients regain their mobility."

"This is a milestone event for Q-Med. We are thrilled to enter into this relationship with Smith & Nephew. Not only are they the most successful company in the US fluid therapy market for OA, they also bring significant product development expertise and experience. We are looking forward to our collaboration on expanding Durolane into the United States, and exploring some of our innovative Nasha concepts in orthopaedics. The synergies of this relationship will benefit Q-Med, Smith & Nephew and patients worldwide" says Bengt Ågerup, Ph.D. and CEO of Q-Med AB.

Ken Reali, Vice President, General Manager, Smith & Nephew Clinical Therapies, added, "An estimated 20 million people in the United States suffer from osteoarthritis. Osteoarthritis represents a significant healthcare issue worldwide, and less then 5 percent of that population seek treatment with their healthcare provider. Durolane complements our existing product portfolio and pipeline, and this agreement provides an opportunity to drive significant growth in the fast-growing joint fluid therapy market."