Shot in the arm for ProStrakan as US approves testosterone treatment

SHARES in ProStrakan surged almost 18 per cent yesterday following approval for its low- testosterone treatment to be sold in the United States.

The speciality pharmaceutical company, based in Galashiels, said its Fortesta gel would be available early next year after getting the nod from US health regulators at the Food and Drug Administration.

It will be launched by ProStrakan's US partner, Endo Pharmaceuticals, which owns the marketing rights for Fortesta in that country.

The news is a significant shot in the arm for ProStrakan, whose business has been embattled by product delays throughout much of this year. Shares in the company, which has also been targeted by opportunistic takeover offers, rose 17.7 per cent or 15.75p to close at 105p.

FDA approval triggers an immediate payment of $12.5 million (8.1m) from Endo to Pro-Strakan. The overall licensing deal could be worth up to $210m to ProStrakan if Fortesta meets certain sales targets, though acting chief executive Peter Allen said there was far more potential beyond those payments.

"The milestones are obviously very helpful, and they boost our cashflow, but for me the more relevant aspect will be the annual income we get from product sales," he said.

Drug companies are increasingly targeting low testosterone as a new market opportunity, particularly in the US, where the condition is more widely recognised and prescribed for. The condition, also known as hypo-gonadism, is associated with low energy levels, erectile dysfunction, osteoporosis and hair loss.

About 14 million American men are believed to have irregularly low testosterone levels, but only about 1.3 million of them are currently being treated. Analysts estimate the current market for such therapies is worth about $1.1 billion.

By contrast, the European market is one-tenth of that size.

Sales of ProStrakan's testosterone gel, known as Tostran in Europe, accounted for about 4m worth of sales in the first half of this financial year.

The milestone payment from Endo means ProStrakan will abandon plans to sell its Xomolix nausea treatment to Canada's Paladin Labs.The two firms will go ahead with other aspects of their strategic alliance announced earlier this month, subject to shareholder approval.

"Selling Xomolix was effectively an insurance policy in case Fortesta didn't go through but, now that it has, we can dispense with that policy," said Allen, who became acting chief executive in September after the sudden departure of Wilson Totten.

ProStrakan shareholders will meet on 7 January to approve the deal with Paladin, in which the Canadian company will get exclusive licence for certain ProStrakan products in exchange for taking on the Scottish firm's 50m in secured debt.

Allen refused to be drawn on the possibility of takeovers, a subject that has dogged Pro-Strakan since the company confirmed in November it had received a number of approaches to buy the business.

ProStrakan had previously rebuffed Amsterdam's Norgine, which owns a 12.6 per cent stake in the company.