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Aradigm Corporation (ARDM) recently announced the closing of an exclusive, worldwide license agreement with Grifols, S.A. (GRFS - Snapshot Report) for the development and commercialization of Aradigm’s proprietary formulations of the antibiotic ciprofloxacin (Pulmaquin and Lipoquin). These formulations are being developed for managing infections associated with severe respiratory diseases -- cystic fibrosis (CF) and non-cystic fibrosis bronchiectasis (BE), and are administered through inhalation.

As per the agreement, the companies will focus on advancing the ciprofloxacin formulations into phase III studies on BE. Grifols will bear the development expenses of up to $65 million for the BE indication and Aradigm will receive milestone payments of up to $25 million.

Furthermore, Aradigm will receive tiered royalties from Grifols on worldwide sales of products which comprise Aradigm’s ciprofloxacin formulations. Grifols also has the choice to license Aradigm's pulmonary drug delivery platform (AERx) for use with another molecule, along with bearing the responsibility for all commercialization activities.

Grifols also acquired a 35% stake by purchasing Aradigm’s common stock at $0.124 per share amounting to a total investment of $26 million.

We note that Lipoquin has orphan drug designation for CF in the U.S. and EU, and for BE in the U.S. Pulmaquin also has orphan drug status for BE in the U.S.

As far as BE is concerned, Aradigm has successfully completed a phase IIa study on Lipoquin, along with a phase IIb study on Lipoquin and Pulmaquin each. For the indication of CF, the company has completed a successful phase IIa study on Lipoquin.

Presently, Aradigm carries a Zacks Rank #3 (Hold). Currently, companies which look attractive include Gilead Sciences Inc. (GILD - Analyst Report) and Jazz Pharmaceuticals (JAZZ - Analyst Report) with a Zacks Rank #1 (Strong Buy) and a Zacks Rank #2 (Buy), respectively.

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