Canon deal to net Psiron $US1m, royalties

Sydney biotech company Psiron (ASX: PSX) has signed a memorandum of understanding (MoU) with Canon, providing the Japanese company with exclusive worldwide rights to the Vapotronics inhaled drug delivery system in return for an up-front payment of $US1 million and potentially substantial royalties.

Psiron recently acquired a majority stake in Vapotronics, which has developed an aerosol drug delivery technology similar to the technology used in inkjet printer cartridges.

"It's probably one of the biggest deals Australian biotech has done," said Psiron CEO Ron van der Pluijm. "The potential is enormous for the royalty stream."

Van der Pluijm explained that the commercial terms of the MoU included royalties of 0.5 per cent on device sales as well as 10 per cent of the royalties received by Canon on pharmaceutical sales. Typically, he said, royalties in the drug delivery systems industry would be between 5 and 15 per cent, meaning that Vapotronics would get royalties equivalent to between 0.5 and 1.5 per cent of the pharmaceutical sales.

With the drug inhalation market expected to reach $US22 billion by 2006, the market for the Vapotronics device could be as high as $US5 billion.

"Initial interest in the technology from the pharmaceutical companies has been very promising and a contact from a major pharmaceutical company has already been received by Psiron", said van der Pluijm.

In addition to the MoU, the two companies are working on a collaborative venture for further development of the system requiring further clinical trials before it can be submitted to regulatory agencies for approval, which van der Pluijm estimated would take around three years. Final agreements would be sorted out by the end of March 2003, he said.

The market reacted positively to the announcement by Psiron, trading around 45 percent higher at 16 cents at the time of writing. Psiron's share price has risen dramatically over the last month, from a low of 3 cents in mid-November.