Staff Writer

Protez Pharmaceuticals is being purchased by Novartis AG in a $400 million deal that could shift development of its broad-spectrum antibiotic into high gear. Company shareholders will net $100 million up front and $300 million upon meeting clinical milestones and obtaining regulatory approval.

The new financial footing afforded by Novartis could take the Malvern, Pa.-based company's lead candidate, PZ-601, into Phase III trials in patients with life-threatening infections.

Under terms of the agreement, Basel, Switzerland-based Novartis will acquire Protez and its product pipeline, including North American and European rights to PZ-601, an injectable carbapenem with the potential to treat infections caused by methicillin-resistant Staphylococcus aureus (MRSA) bacteria. Protez will become a stand-alone subsidiary of Novartis.

In 2005, Protez entered an exclusive licensing agreement with PZ-601's original developer, Osaka, Japan-based Dainippon Sumitomo Pharma Co. Ltd. That deal gave Protez access to the Japanese firm's research and development capabilities and commercialization rights to PZ-601 in the U.S., Canada and the European Union, said Christopher M. Cashman, Protez president and CEO .

"We licensed the compound from them at a very early stage, and licensed rights in North America and Europe. So they assist us primarily from a manufacturing point of view because they have expertise in carbapenem manufacturing," he said.

That arrangement will remain intact in spite of the company's acquisition by Novartis, Cashman said.

But more importantly, the agreement with Novartis could help Protez pursue Phase III trials of PZ-601. The company initiated Phase II studies of the compound in patients with complicated skin and skin structure infections in May. That study will enroll 100 adults across 20 U.S. sites to evaluate the safety and efficacy in patients with infections such as cellulitis, abscesses, infected wounds and ulcers.

PZ-601 was proven to be safe in a Phase I trial, where it was tested in 24 healthy male volunteers. In that study, the compound showed positive in vitro activity against extended-spectrum beta-lactamase producing organisms, which cause urinary tract infections, intra-abdominal infections, bloodstream infections, postsurgical wound infections and hospital-associated pneumonia.

Cashman said the drug's ability to target a wide variety of infections makes it a good choice to replace a variety of other antibiotics. "It has the activity profile that not only covers MRSA and other Gram-positive resistant bacteria, but also primary Gram-negative bacteria as well. So you get this broad profile for the compound that will give great coverage," he said.

That profile makes PZ-601 a marketable product candidate, especially in light of growing concern over antibiotic resistance and communicable infections.

According to the Centers for Disease Control and Prevention, 2 million people in the U.S. develop hospital-acquired infections each year, and approximately 90,000 die as a result. In Europe, an estimated 3 million hospital-acquired infections occur each year, resulting in about 50,000 deaths.

In addition to renewed public interest in MRSA infections, timing may have been a crucial factor in the deal between Protez and Novartis. "We felt that joining forces with Novartis at this stage was a tremendous opportunity for Protez," Cashman said.

He said the company was at a crossroads in developing the antibiotic. "We were faced with advancing PZ-601, and as we did the planning for Phase III studies and beyond, it was clear that we needed additional resources and capabilities in place to rapidly advance the program," he said.

And Protez hopes that the agreement with Novartis will take the development costs for PZ-601 out of its hands and put more money in the pockets of its investors. "This capital is primarily being returned to the shareholders, so that the future costs of the advancement of the program will be covered by Novartis. In a sense, that's not even part of this $400 million," Cashman said.

The deal also will enable Protez to focus on other products in its portfolio. According to Cashman, Protez has garnered $25 million in investments, but has no revenue to speak of, since none of its projects have reached commercialization.

But Cashman said the company has two research programs ongoing, one which involves an oral prodrug formulation of PZ-601. Unlike the injection in current studies, an oral formulation would enable "step-down therapy or an oral follow-on once a patient comes out of the hospital," he added.

Protez also has a series of beta-lactamase inhibitors in development.

Novartis wasn't the only company that came courting, Cashman said. "We have been very open with outside companies about the progress of PZ-601. So there are a number of companies we've met with over time to bring them up to speed on the program and the progress we were making. But Novartis really separated itself from the other companies. They really shared the same strategic view of the market that we held," he said.

From a broader point of view, Cashman said the partnership between Protez and Novartis should serve as a stimulus for other solutions to antibiotic resistance. "I think it was really a call of action for both companies," he said.

And Cashman pointed out that the agreement underscores not only the importance of that problem to Protez and Novartis, but also the need to find novel approaches to dealing with superbacteria. "It's kind of a calling on the unmet medical need out there. It really emphasizes how rapidly these resistant bugs are growing," he said.