Myogen

( MYOG) said it has signed an agreement that will enable British drug giant

GlaxoSmithKline

(GSK) - Get Report

to market the company's top prospect outside the U.S.

The drug, still in late-stage clinical testing, is called ambrisentan. The medication is aimed at treating pulmonary arterial hypertension, or PAH, which causes high pressure in the artery that carries blood from the heart to the small arteries in the lungs. PAH can lead to heart failure.

Myogen has no commercial products, but the pact provides it with some upfront money as well as the overseas marketing clout of GlaxoSmithKline. In addition, GlaxoSmithKline has licensed to Myogen the U.S. marketing rights for Flolan, an older PAH drug. The British drugmaker gets a piece of the action for ambrisentan, a

promising compound in a crowded field of treatments and experimental drugs.

Myogen's announcement Monday of its deal with GlaxoSmithKline coincided with the release of its fourth-quarter and full-year financial data. For all of 2005, Myogen lost $63 million, or $1.68 a share, on R&D revenue of $7 million. For 2004, it lost $57.7 million, or $2 a share, on revenue of $6.6 million.

The company said the GlaxoSmithKline deal and other development activities make it difficult to offer precise guidance for 2006. "However, we believe our cash, cash equivalents and investments, together with expected licensing proceeds, will be sufficient to fund operations until at least the end of 2007," the company said.

"The Flolan distribution agreement is expected to underwrite the development of our own commercial organization and marketing and field-selling expertise in PAH, well in advance of the potential launch of ambrisentan," said J. William Freytag, president and CEO of Myogen, in a prepared statement. "We believe this strategic development will accelerate our understanding of customer needs, reimbursement opportunities and market dynamics in general."

Myogen will get $20 million up front and could receive as much as $80 million if it achieves certain milestones. Myogen also will receive royalties on product sales. The companies will share the costs of certain additional clinical development activities. The agreement means that Myogen will start hiring a sales force during the second quarter to sell Flolan in the U.S. The agreement lasts three years and can be renewed.

The deal highlights the intense interest in a relatively rare disease. According to Sagient Research Systems of San Diego, there are about 50,000 PAH patients in the U.S. and another 50,000 in Europe. Myogen estimates 200,000 people are affected worldwide.

"Despite the relatively small number of cases, development of therapies for PAH has attracted significant research and development spending given the unmet medical need ... and high per patient pricing," says Sagient, a firm that tracks biotechnology developments. Sagient says it's possible some PAH-drug makers might try to expand their products' coverage to congestive heart failure or high blood pressure.

Five companies now market PAH drugs including

Pfizer

(PFE) - Get Report

, whose Revatio is a version of its impotence drug Viagra. Other participants include

CoTherix

(CTRX)

,

United Therapeutics

(UTHR) - Get Report

and the market leader,

Actelion Pharmaceuticals

.

An experimental compound from

Encysive Pharmaceuticals

( ENCY) is under review by the Food and Drug Administration, and the agency is expected to act later this month.

Icos

( ICOS) is holding late-stage clinical trials to determine if its impotence drug Cialis could treat PAH.

Myogen signed its marketing deal with GlaxoSmithKline about one month before crucial clinical trial data are expected to be released. Myogen predicts it will seek regulatory approval in the U.S. and European Union during the fourth quarter.

Ambrisentan has attracted Wall Street's attention thanks to earlier favorable test results and the fact that it's a once-a-day pill. Flolan, the oldest PAH drug, must be taken intravenously. Myogen said that ambrisentan, which is being developed for less severely ill PAH patients, complements Flolan, which is usually used in later-stage PAH. Flolan has been on the market since 1995.

One key test of ambrisentan's clinical trial results and the regulatory review will be how well the drug's side-effects profile compares with existing products. For example, although Actelion's twice-a-day pill Tracleer is the market leader, its label carries a "black box warning," the FDA's toughest alert, about possible liver damage and potential damage to a fetus.

The company issued its announcements after the markets had closed. In regular trading, the stock ended at $41.31, up 33 cents. After hours, the shares dropped $4.34, or 10.5%, to $36.97.