Biotech company Acrux thrills market with licensing deal worth up to $US335 million

After a difficult 18 months for the Australian biotechnology sector, Melbourne-based drug developer Acrux has boosted the industry's confidence by signing a licensing deal worth up to $US335 million for its underarm treatment for men with low testosterone levels.

Acrux, which specialises in developing pharmaceutical products delivered via the skin, announced the deal for its Axiron product with US pharmaceutical giant Eli Lilly.

Axiron, delivered as an underarm roll-on treatment, is designed to the treat the symptoms of testosterone deficiencies in men over 50. It is estimated that 39% of men over this age suffer symptoms of this problem, including weight loss, mood swings and low libido.

Under the terms of the deal, Eli Lilly will have the right to distribute the drug in 143 counties, including Australia.

In return, Acrux will receive an upfront payment of $US50 million, and a further $US3 million after the transfer of manufacturing assets to the US giant.

Acrux is then set to receive $US87 million once the drug gets marketing authorisation from the US Food and Drug Administration, up to $US195 million in potential commercialisation milestones, and future royalty payments.

Acrux chief executive Richard Treagus said the company is delighted to have signed the deal, which is one of the largest in the history of the Australian biotech sector.

He says while the deal is a reward for the hard work of the company's management team and staff and the patience of investors, it also a boost for the credibility of Australian biotechnology companies.

"We have been be able to demonstrate that we can develop a technology, patent it and commercialise it on a global scale," he says. "It demonstrates that it can be done."

The announcement of the deal gave Acrux shareholders – who include billionaire Lang Walker – another reason to smile.

The stock has risen almost 5% in the last two days and has jumped more than five-fold – from 47c to $2.49 – in the last 12 months.

Acrux is forecasting a maiden profit after tax for the year ended June 30 of between $44 million and $48 million.

Treagus says while Axiron will continue to deliver income for the company for many years, Acrux can turn its attention to its other products, including female testosterone products and treatments for animals.

"We're certainly not a one-product company."

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