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Medicis Pharmaceutical Corp. recently entered into a research and development agreement with Anacor Pharmaceuticals Inc. (ANAC - Snapshot Report) for the discovery and development of boron-based small molecule compounds for the potential treatment of acne.

Per the terms of the agreement, Medicis will make a $7 million upfront payment to Anacor. Anacor will also be eligible to receive up to $153 million on the achievement of certain research, development, regulatory and sales milestones. Moreover, Medicis will have to make sales-based royalty payments to Anacor in the high single-digit to low double-digit range.

Under the agreement, Anacor will be discovering and conducting the early development of candidates, utilizing its proprietary boron chemistry platform, while Medicis will have an option to exclusively license those products. Additionally, Medicis will be responsible for further worldwide development and commercialization of the licensed products.

Our Take

We currently have a Neutral recommendation on Medicis. We believe that the deal with Anacor could prove to be quite beneficial for Medicis, which is currently up against competitive threats for Dysport (used for the treatment of glabellar lines) from Allergan Inc.’s (AGN - Analyst Report) Botox.

We note Anacor has out-licensed one of its novel small-molecule therapeutics, GSK ‘052, derived from its boron chemistry platform to GlaxoSmithKline plc (GSK - Analyst Report). The compound is being evaluated for the treatment of infections caused by Gram-negative bacteria. Apart from GSK ‘052, Anacor has four more compounds in development, which have been derived from its boron chemistry platform. These include treatments for onychomycosis, psoriasis, skin fungal infections and atopic dermatitis.

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