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Pfizer marketing muscle boosts Schwarz drug

German firm could earn up to $210m in incontinence medicine licensing deal

Shares in Schwarz Pharma rose 13 per cent after the German firm announced it had signed a licensing deal with Pfizer for incontinence drug, fesoterodine, which could be worth as much as $210m.

Under the terms of the agreement, Schwarz will give all rights to the world's largest pharma firm in return for an upfront payment of $100m and potential milestone payments of $110m if the drug is approved in Europe and the US.

The deal also removes legal uncertainty over the drug as it settles a UK lawsuit filed by Pfizer, which alleged that fesoterodine had infringed patents on its own incontinence treatment, Detrol.

Schwarz's development of fesoterodine underlines the firm's strategy to move away from generics into branded medicines.

ìPfizer's experience and commercial resources ensures that fesoterodine will become broadly available,î said Schwarz chief executive officer, Patrick Schwarz-Schuette. ìWe will invest the funds from this transaction to further strengthen our pipeline.î

Analysts reacted warmly to the news, saying that fesoterodine could only benefit from Pfizer's marketing power and expertise in selling incontinence products. A further bonus for Schwarz is that it is set to receive royalties on the combined sales of fesoterodine and Detrol as part of the deal.

ìThe fact that royalties will be paid across the whole of Pfizer's current franchise de-risks Schwarz from any launch risk and provides an immediate, substantial income stream,î said Lehman Brothers in a research note.

NordLB analyst Thorsten Strauss described the deal as positive news but said the Schwarz share price was `too expensiveî. He added that the surge in the share price was no surprise but added that optimism surrounding the stock is now overly priced-in.

Fesoterodine has recently been submitted for approval in the US and Europe. Schwarz said it expects peak annual sales of Ä450m ($547m) from fesoterodine, which could reach the market by the end of 2007.

Schwarz is also developing drugs for Parkinson's disease, restless legs syndrome, epilepsy and neuropathic pain.

30th September 2008

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