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Isotechnika Inc. is in line to receive up to $215-million (U.S.) from Swiss drug giant Roche AG after the biotech company inked a record Canadian drug development deal Tuesday.

The global co-development accord covers Isotechnika's novel ISAtx247 drug to help patients fight organ rejection after a transplant.

Isotechnika has claimed that its drug is three times more potent and up to five times less toxic to kidneys than existing drugs such as Novartis AG's cyclosporine, the current gold standard in tissue transplants.

"ISAtx247 has the potential to be a blockbuster," Dennis Burns, global head of business development for Roche's Canadian arm, Hoffmann-La Roche Ltd. of Mississauga, told a media briefing Tuesday.

The industry labels drugs as blockbusters when they achieve annual sales of $1-billion. The 247 drug also is being tested as a treatment for auto-immune diseases such as arthritis and psoriasis.

The global annual market for these types of "calcineurin-inhibitor" drugs that suppress an immune response to reject transplant tissue is now more than $2.2-billion, with cyclosporine sales accounting for half of the market.

The Isotechnika drug is now undergoing Phase II trials with kidney transplants and to treat psoriasis.

Roche has three fast-growing drugs in the transplant segment - CellCept, Zenapax and Cytovene - that are in a different chemical class from cyclosporine and Isotechnika's 247.

Roche's transplant portfolio generated sales of 1.1 billion Swiss francs last year, a 35 per cent increase from 2000.

"ISAtx247 and CellCept have the potential to be the most widely used drug combination to prevent organ rejection after transplant," Isotechnika president Randall Yatscoff said.

Isotechnika shares rose 58 cents (Canadian) or almost 12 per cent to $5.47 Tuesday in heavy Toronto Stock Exchange volume of 2.6 million shares.

David Wingnean, an analyst with TD Newcrest, upgraded Isotechnika to "strong buy" from "speculative buy" on the strength of what he calls a "fantastic" deal with Roche.

"We got excited about the Isotechnika story a year ago when we determined that the science is first-rate," he said. "They also have world leaders in the field on their scientific advisory board."

Vera Belaoussoff, an analyst with Harris Partners Ltd., said the deal "validates the science at a very early stage and reduces the commercial and regulatory risk."

She also likes the deal because the two companies have established a joint decision-making committee to guide development of the drug.

"Isotechnika is not willing to sign over the drug and let somebody else develop it," she said. "They're in it for the long haul."

Under the accord, which has been in the works for the past 12 months, the Edmonton-based company will receive an up-front payment from Roche that sources estimate at $40-million (U.S.) and additional payments as future development milestones are achieved.

Roche will pay 70 per cent of the development costs estimated at up to $700-million to launch the 247 drug in 2005 or 2006, and Isotechnika will pay 30 per cent.

In return for giving Roche worldwide marketing rights, Isotechnika will receive an undisclosed percentage of gross profits on sales. The two companies are still considering who will manufacture the drug.

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