Phytopharm surges on weight-loss drug success

The extract is derived from the African Hoodia cactus, which the San bushmen of the Kalahari desert have been eating for thousands of years to stave off hunger during long hunting trips. The cactus contains a molecule that fools the brain into believing the stomach is full. The licence for the molecule, discovered by South African scientists, was sold in 1997 to Phytopharm, which teamed up with Unilever to conduct safety and efficacy studies and bring the weight-loss product to market.

The yet-to-be-named treatment is expected to be launched in 2008, after first-stage tests showed it is commercially viable to produce the extract. Phytopharm and Unilever are embarking on clinical trials in the second stage of the project to make sure it works on humans and is safe to use. At the same time, Unilever is running a separate agronomy programme to determine whether the cactus, which takes 50 years to reach maturity, can be grown commercially.

As part of the 2004 co-operation agreement between the two companies, Unilever committed to an initial payment of £6.5m for the first stage and has now committed a further £3.5m out of a total of up to £21m in payments to Phytopharm. In addition Phytopharm will receive an undisclosed royalty on sales of all products containing the extract.

Richard Dixey, the chief executive of Phytopharm, said: "Our partnership with Unilever provides a fully funded programme and we look forward to generating royalty income from our partner's globally recognised brands."

After the clinical trials, expected to take a year, Unilever will work on the branding and marketing of the product. The consumer giant pumps €1bn (£694m) into research and development each year, the bulk of which is spent on developing "look good, feel good" products such as antioxidants in tea and appetite suppressants.

In January, Phytopharm struck a deal to license its skin treatment for dogs to Schering-Plough's animal health unit, with expected annual sales of up to $40m (£23m). The news on both treatments has given a welcome boost to Phytopharm, which suffered a setback in November when its Alzheimer's drug failed to show benefits in tests. Phytopharm shares closed up 4p at 43p.