Chiron

(CHIR) - Get Report

is turning to

Inhale Therapeutics

(INHL)

for help in developing a new version of its cystic fibrosis drug, TOBI.

The two biotech firms inked a drug development pact Tuesday. Inhale will be responsible for developing a new formulation of the drug for use with its Inhance inhaler, a small, pocket-sized device. Chiron will test the new drug and device, and will be responsible for its eventual sale, if approved by drug regulators.

Financial terms of the deal were not disclosed, but Chiron will pay Inhale development fees and royalty payments if and when the drug is sold.

The current version of TOBI is an inhaled antibiotic for treating

Pseudomonas aeruginosa

lung infections in patients suffering from cystic fibrosis, a disease that produces thick mucus that clogs airways and results in lung infections. Chiron gained access to the drug when it acquired Pathogenesis in September 2000. TOBI sales totaled $89.5 million in the first three quarters of the year, about a 50% rise over the same period last year.

Cystic fibrosis patients currently breathe TOBI into their lungs using a device called a nebulizer, which is a larger inhaler than the Inhance device.

"We believe that the Inhance platform offers significant benefits for pulmonary drug delivery and that it could expedite the development of our next-generation inhaled anti-infective products," said Craig Wheeler, president of Chiron's BioPharmaceuticals division, in a statement. "The next generation of TOBI is a pivotal part of our strategy to expand our TOBI franchise by providing faster and easier treatment options for cystic fibrosis patients."

Chiron and Inhale will also work together to develop other inhaled antibiotics, the companies said.

Shares of Chiron were up 34 cents to $42.60 in recent Tuesday trading. Shares of Inhale were up 39 cents to $16.45.