BioDelivery Sciences International is acquiring RTP-based Arius Pharmaceuticals in an all-stock deal that is potentially worth some $7 million.

Arius will operated as a wholly owned subsidiary of BDSI and continue to operate in RTP, the companies said. The company was founded in 2003.

Arius was launched by two former executives at Glaxo-Wellcome. Mark Sirgo will join BDSI as senior vice president of commercialization and corporate development. Andrew Finn will become BDSI’s senior vice president of product development.

“Our merger with BDSI is highly complementary and combines not only two cutting-edge drug delivery technologies, but also our pipelines of potential products in development and the significant expertise of our personnel,” Sirgo said in a statement. “Importantly from our perspective, the combined company will have the personnel that can take potential products from the bench to the marketplace.”

Arius is a specialty pharmaceutical company. One of its target areas is potential treatments for rapid, oral delivery of sedation and pain relief of surgical and oncology patients. One drug is scheduled for Phase III clinical trials in mid-2005, BDSI said.

“The acquisition furthers BDSI as a specialty biopharmaceutical company developing selected patented drug delivery technologies with significant potential out-licenses, in addition to an exciting proprietary pipeline,” said Francis O’Donnell, Jr., chairman, president and CEO of BDSI, in a statement. “We believe that the most successful business models for drug delivery technology companies have been exemplified by those companies which, in addition to out-licensing their delivery technology to third parties, also evolved into specialty pharmaceutical companies by utilizing their own technologies to commercialize proven therapeutics in proprietary formulations offering significant clinical advantages.”

BioDelivery (Nasdaq: BDSI) is based in Newark. NJ.

Holders of Arius stock received 1.647 million shares of BioDelivery stock. BDSI closed at $1.66 on Wednesday.

The deal was based on BioDeliver’s IPO price of $4.25 a share. It has a 52-week high of $4.60.

BioDelivery said the stock will be converted to common stock at the $4.25 price when FDA approval of the first Arius product is received or five years from the deal’s closing.

BioDelivery has a patented delivery technology for pharmaceuticals, vaccines, over-the-counter drugs, and other products.

The company recently closed on a new $4 million credit facility. It is appealing a delisting order from NASDAQ.