Santarus, Inc has entered into a strategic collaboration with Cosmo Technologies Limited (Cosmo), a wholly-owned subsidiary of Cosmo Pharmaceuticals SpA, which grants Santarus exclusive rights to develop and commercialize Budesonide MMX and Rifamycin SV MMX for the US market.

Terms of the agreements include an upfront payment to Cosmo of cash and Santarus common stock, shared development costs, clinical/regulatory and commercial milestones and a royalty on net sales.

Budesonide MMX is an oral corticosteroid currently being investigated in two multi-centre phase-III clinical trials involving more than 800 patients in North America and Europe for the induction of remission of mild-to-moderate ulcerative colitis. Budesonide MMX is designed to retain the effectiveness of classical corticosteroids, but with reduced side effects due to its targeted controlled release in the colon with minimal systemic absorption.

Rifamycin SV MMX is a broad spectrum, semi-synthetic antibiotic that also has targeted release characteristics when taken orally. The application of MMX technology to Rifamycin SV allows the antibiotic to be delivered directly to the colon, with the goal of minimizing unwanted effects on the bacterial flora in the small intestine. Cosmo has completed a phase-II clinical programme in traveler's diarrhoea.

These two compounds are formulated using Cosmo's patented MMX Multi Matrix System technology. MMX is a proprietary technology platform designed to produce a controlled release, homogeneous local application of the active pharmaceutical ingredient (API) throughout the colon, thereby limiting systemic absorption and offering an opportunity for reduced side effects. The MMX technology is covered by two issued US patents that expire in mid-2020, and additional patent applications are pending at the US Patent and Trademark Office.

"Our business objectives are well aligned with Cosmo's to successfully develop and commercialize these late-stage compounds that are designed to address difficult-to-treat lower GI conditions and we are extremely pleased to broaden our clinical pipeline through this strategic collaboration," said Gerald T Proehl, president and chief executive officer of Santarus, Inc. "Importantly, Cosmo has prior experience in developing and partnering a lower GI drug for the USmarket as evidenced by the successful US commercialization of Lialda (mesalamine), Cosmo's first commercial product formulated with the MMX technology."

Mauro Ajani, chief executive officer of Cosmo Pharmaceuticals, said, "After a thorough assessment of potential US partners, we determined that Santarus is an excellent choice for the clinical, regulatory and commercial development of Budesonide MMX and Rifamycin SV MMX for the US market. Santarus has a strong focus and commitment to the GI specialty, and a successful track record in advancing products from clinical development through commercialization. We have already begun to develop a strong working relationship and we believe the two companies bring complementary skills to the collaboration. Our equity ownership position in Santarus will further align our interests and it reflects our confidence in the long-term value of Santarus' business."

Under the terms of the agreements, Santarus will pay Cosmo an upfront cash fee of $2.5 million and will issue to Cosmo 6 million shares of Santarus common stock. These shares will be subject to an initial 15-month restriction on their sale or transfer. Santarus may also pay Cosmo up to a total of $9 million in clinical and regulatory milestones for the initial clinical indications, up to $6 million in clinical and regulatory milestones for a second indication for Rifamycin SV MMX, and up to $57.5 million in commercial milestones. If and when earned, the milestones will be payable at Cosmo's option in either Santarus common stock or in cash, subject to certain limitations.

Santarus will reimburse Cosmo approximately $2.8 million by January 31, 2009, which represents Santarus' 50 per cent share of the phase-III clinical trial costs for Budesonide MMX incurred by Cosmo through mid-November 2008. Going forward, Santarus will be responsible for 50 per cent of the costs associated with the ongoing US registration and European Budesonide MMX phase-III clinical trials and all costs for the future phase-III US registration clinical trial for Rifamycin SV MMX. Assuming regulatory approval and commercial launch, Santarus will pay to Cosmo tiered royalties on net sales of each product ranging from 12 per cent to 14 per cent, subject to reduction in limited circumstances. Cosmo or its affiliate will be responsible for the manufacture and supply of the products under a supply agreement to be negotiated at a later date.