Microbia agrees to deal to develop first drug

Microbia Inc., a promising Cambridge biotech company, said it has signed a multimillion-dollar deal with a New York drug company to jointly develop and market Microbia's first drug.

Under terms of the agreement, Forest Laboratories Inc. agreed to initially pay Microbia $70 million in licensing fees to share in the rights of Linaclotide, an experimental drug aimed at treating irritable bowel syndrome, chronic constipation, and other gastrointestinal disorders. But Microbia says it could ultimately earn $330 million in licensing and milestone payments over the life of the agreement.

Chief executive Peter Hecht, who has led the company since its founding nine years ago, said numerous pharmaceutical companies expressed interest in the drug.

"This collaboration is first and foremost the best way we think we can get the drug to patients," Hecht said. But he also said the pact provides money to build its commercial capabilities and continue working on a pipeline of future drugs.

It is the latest vote of confidence in the privately held company. Microbia has already raised $231 million in private equity funding and is thought to be a candidate for an initial public offering. In addition to Linaclotide, Microbia has two other drugs in development, both to treat high cholesterol. Investors in the company include Fidelity Biosciences Group in Cambridge, Polaris Venture Partners in Waltham, and Venrock Associates of Menlo Park, Calif.

Microbia, founded in 1998, has 110 employees.

As part of the deal, Microbia and Forest agreed to jointly develop and commercialize the drug in the United States, splitting the profits equally. Forest, a specialty pharmaceuticals company, will receive the exclusive rights to the drug in Canada and Mexico, while Microbia will retain all the rights outside of North America.

Microbia and Forest plan to begin phase 3 studies of the drug in 2008, large scale tests needed to prove the drug is effective to win approval from the Food and Drug Administration. The company has already shown tantalizing results in earlier stage trials. But only a fraction of drugs that show promise in early stage trials ever make it to market.

Todd Wallack can be reached at twallack@globe.com.