June 16, 2011 / 8:10 AM / 8 years ago

UPDATE 2-Zealand Pharma jumps on Boehringer diabetes deal

* Partners agree to develop diabetes and obesity treatments

* Zealand sees milestone payments of up to 376 mln euros

* Zealand Pharma shares leap 8.4 pct on soft bourse

(Adds background, analyst comments, updates share price)

By Mette Fraende

COPENHAGEN, June 16 (Reuters) - Danish biopharma firm Zealand Pharma (ZELA.CO) has signed a deal with German drugmaker Boehringer Ingelheim to develop new compounds to treat Type-2 diabetes and obesity, the company said, boosting its shares.

Zealand Pharma said on Thursday that Boehringer Ingelheim, Germany’s second-largest pharmaceuticals company, would obtain global rights to a number of drugs, including the leading drug candidate in its class, ZP2929.

Shares in Zealand Pharma traded up 8.4 percent at 71 crowns by 0925 GMT after initially leaping 13 percent, while the Copenhagen bourse's blue-chip index .OMXC20 fell 2.04 percent.

Zealand Pharma said it would be eligible for total projected milestone payments of up to 376 million euros ($531.7 million) for ZP2929, which one investment house said had blockbuster potential.

A blockbuster is a drug with annual sales of more than $1 billion.

“We believe ZP2929 could achieve blockbuster status given further expansion of the ... market, which we estimate could reach over $4.5 billion by 2018,” Jefferies said in a note to clients.

Jefferies said the deal was a significant positive driver for the stock, and provided an important validation of Zealand Pharma’s platform technology, and funding for the next few years’ research and development spending on the programme.

“Importantly this deal also further demonstrates management’s ability to execute strategic licensing deals and crystallise value,” Jefferies said.

Under the agreement, Zealand would be responsible for conducting the first Phase I study with ZP2929, while privately held Boehringer would fund the research, development and commercialisation of products, Zealand Pharma said.

During the first two years, Zealand Pharma would be eligible to receive signature, milestone, and other payments of up to 41 million euros, including cost reimbursements and research funding of up to 4 million euros, it said.

“We are extremely pleased to have signed this licence and collaboration agreement with Boehringer Ingelheim, which has recently strengthened its commitment to the important field of diabetes,” Zealand Pharma’s Chief Executive David Solomon said in the statement.

“ZP2929 is one of Zealand Pharma’s most innovative peptide drug candidates, having shown significant pre-clinical promise for patients with Type-2 diabetes and obesity,” Solomon said.

The deal was expected to positively affect Zealand Pharma’s revenue and other income by about 20 million euros this year, but would not change its guidance for operating expenses of 23 million euros, the company said.

Zealand Pharma’s most advanced candidate drug is lixisenatide, which it is developing with Sanofi-Aventis (SASY.PA) for type-2 diabetes.

Lixisenatide belongs to the GLP-1 class of drugs that stimulate insulin release when glucose levels become too high.

Sanofi is developing lixisenatide as a monotherapy and in a combination with Lantus, its best-selling global insulin product.

($1=.7072 Euro)

Reporting by Mette Fraende; editing by David Hulmes

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