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Pharmaceutical Firms are Desperate For New Drugs

ANOTHER PHARMA/SMALL BIOTECH AGREEMENT

      Kosan Biosciences (KOSN) signed a worldwide license agreement with Pfizer to collaborate on filing of regulatory documents and initiation of a Phase 1 clinical trial of motilin agonist KOS-2187 and related compounds. The investigational drug has demonstrated improved gastric emptying in preclinical studies and may have therapeutic benefit in gastrointestinal diseases such as gastro- esophageal reflux disease (GERD), or diabetic gastroparesis (delayed gastric emptying).

                                                                       The Beef

- Pfizer is responsible for all development, regulatory and commercial activities of the program.

- Pfizer will pay an upfront payment of $12.5 million.

- Kosan is eligible to receive $250 million for the successful outcome of KOS-2187 for one indication.

- Kosan will get royalties on worldwide sales.

- The total value of up to $250 million includes development milestone payments of up to $72.5 million.

- Should Pfizer elect to develop KOS-2187 for a second indication or to develop other Kosan compounds within the licensed rights, additional development and commercial milestones may be payable to Kosan as well as royalties on worldwide sales of any licensed Kosan product.

       "We have achieved a major corporate goal by partnering our gastrointestinal-focused motilin agonist program with Pfizer" said Robert G. Johnson, Jr., M.D., Ph.D., President and Chief Executive Officer of Kosan. "Kosan today is focused on advancing novel cancer therapeutics, as evidenced by our advancing Hsp90 inhibitor and epothilone oncology programs, which are progressing into later-stage clinical development.

      Motilin agonist program is the most promising polyketide-based, non-oncology asset to emerge from our proprietary discovery platform. This agreement with Pfizer further underscores Kosan's ability to convert technology into valuable product opportunities."

    Pfizer believes that the mechanism of action of KOS-2187 and its demonstrated activity as a prokinetic agent are significant indications of its potential as a new approach for the treatment of gastrointestinal diseases.

Motilin, a hormone that is secreted by the small intestine, stimulates gastrointestinal motility (movement). Erythromycin, a polyketide best known for its antibiotic activity, is an agonist of the motilin receptor that enhances esophageal motility in GERD patients and accelerates gastric emptying in patients with diabetic gastroparesis. Kosan has developed potent, non- antibiotic derivatives of erythromycin for the treatment of gastrointestinal motility disorders, and selected KOS-2187 as a clinical candidate.

KOS-2187 is a potent, selective motilin receptor agonist that is chemically stable and orally bioavailable and lacks antibiotic activity. In preclinical studies, KOS-2187 showed an improved safety profile relative to erythromycin and accelerated gastric emptying, suggesting that it may provide symptom relief in several gastrointestinal diseases.

       Kosan has prepared a clinical trial application (CTA) for filing with the European regulatory authorities to enable first-in-human studies of KOS-2187. Pfizer plans to file the Kosan CTA and initiate clinical trials in early 2007.

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