GW signs up Japanese firm to help develop cannabis painkiller

GW Pharmaceuticals, which specialises in drugs derived from cannabis, has secured a development and marketing deal worth up to $273m (£137m) for its pioneering medicine Sativex.

Analysts said the deal with Otsuka, a privately owned Japanese business with a subsidiary in the US, was its most significant to date. Otsuka will pay for all clinical development of Sativex in the US. The medicine will initially be for the treatment of pain associated with cancer but could later be extended to other therapy areas, such as MS.

GW received an upfront payment of $18m and the rest will be triggered when milestones are met. Furthermore, as part of the deal Otsuka has signed up to a broad research collaboration to access all of GW's cannabanoid pipeline.

"This is a major validation of GW's research prowess in cannabanoids," said Investec analyst Ibraheem Mahmood.

GW's shares rose 2 per centto 101.75p yesterday, giving the company a market valuation of around £122m.

"GW has just landed its most important partnering deal," Mr Mahmood added.

The US regulatory body, the Food & Drug Administration, is allowing GW to move straight to phase three trials for the treatment of pain in patients with late-stage cancer. GW is hoping to file Sativex in the US by 2010 and it could be on the market by 2011 with sales expected to peak at $390m.

Otsuka has cut itself a niche in selling central nervous system (CNS) related drugs. Ablify, its blockbuster product for schizo-phrenia, has seen worldwide revenues increase from $1.3bn in 2005 to more than $1.9bn last year. Overall, the company earned revenues of $6.8bn last year.

Justin Gover, GW's managing director, said the deal was a "potentially transforming event for the company".

"It will allow us access to the world's largest market, in the US, and it is particularly attractive as Otsuka recognises the potential of the pipeline," Mr Gover said.

"There is a lot more to our programme than Sativex. There is a wealth of research potential in cannabanoids."

Other therapy areas the company is looking at include epilepsy, Parkinson's disease and schizophrenia.

Taro Iwamoto, president of Otsuka, said scientists at the firm consider cannabinoids to be a "significant potential source of new medicines".

GW is currently awaiting news on approval from European regulators for Sativex as a treatment for MS spasticity. It is also carrying out a further trial to assess its effects on neuropathic pain.