The deal strengthens Paion\'s hand if it were to try to make a market debut but also opens up other funding and partnership options.
Paion and New York-based Forest said in a statement that Forest would get the U.S. and Canadian rights for the drug for unspecified upfront and milestone payments - paid at various stages of a drug\'s development - plus royalties if the drug came to market.
Paion keeps rights in the rest of the world to the drug, desmoteplase, which is in mid-stage trials. Paion said that Forest could file for U.S. approvals as early as 2007.
Paion and Forest said the drug had been given fast-track status by the U.S. Food and Drug Administration, which would allow the submission of trial data when it became available.
Paion had said last year that it could need 40 million euros ($49.17 million) to take desmoteplase to the filing stage if it did not find a partner.
Paion Chief Executive Wolfgang Soehngen told Reuters in a telephone interview that the Forest deal would make it easier to take Paion public as well as open other options for funding.
\"This would help us in an IPO situation, but it also gives us more flexibility,\" he said.
\"If we fully develop our pipeline, we would need extra money in the next 12-16 months from now and that is the timeframe in which we will decide on an IPO or other modes of financing.\"
Paion licensed desmoteplase from German drugmaker Schering in 2000, and Soehngen said it was in talks to buy licenses for more stroke products and would like to have another product before raising funds again.
Forest Laboratories CEO Howard Solomon said in a statement that the deal gave Forest its first biotech product.
Forest\'s top-selling drugs are anti-depressants Celexa and Lexapro. It recently launched Namenda to treat Alzheimer\'s Disease and offset declining Celexa sales.
Desmoteplase is a genetically-engineered version of a protein in the saliva of vampire bat Desmodus rotundus that enables it to suck blood from its prey by preventing clotting.
The bat is just eight centimeters long and lives solely on blood. It needs about 50 grams of the fluid daily, sucking it in after puncturing the skin of cattle and horses with its sharp teeth. Clotting during the meal - it can take half an hour\'s feeding to satiate a bat - can stop it feeding.
Paion has said desmoteplase is effective even if given up to nine hours after a stroke.
If desmoteplase comes to market, it will compete against the current leading treatment, t-PA, made by Genentech, which needs to be administered within three hours of a stroke.
Paion raised 9.8 million euros in a fourth round of funding in May. Private equity firm 3i group is the largest investor in Paion, which has raised 51.2 million euros. (Additional reporting by Toni Clarke in New York)