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Basilea Hands Off Eczema Drug Toctino to GSK; $227M Up Front

By Cormac Sheridan
Staff Writer

In a deal that is an asset disposal in all but name, Basilea Pharmaceutica AG is banking £146 million up front (US$226.8 million) and could get between £30 million and £50 million more in regulatory milestones from a global agreement on its hand eczema drug Toctino (alitretinoin) with Stiefel, the dermatology subsidiary of GlaxoSmithKline plc.

Although Basel, Switzerland-based Basilea also stands to earn low double-digit royalties on U.S. sales of the product, those royalties will only start to flow three years after a potential U.S. approval.

Basilea is unlikely to make any aggressive forecasts on any future potential cashflows – the drug, an oral retinoid, faces patent expiry starting in 2018.

The size of the milestone is tied to the timing of a potential approval. Toctino, which is approved for treating severe chronic hand eczema refractory to topical corticosteroids, is on course for an new drug application before year-end, having attained the primary endpoint in a U.S. Phase III trial, called HANDEL, earlier this year. Forty percent of patients receiving the drug achieved "clear" or "almost clear" hands – measured using a physician global assessment – vs. 15 percent of those who received placebo (p < 0.001).

Philippa Gardner, analyst at Jefferies, counseled caution, however, on the basis that the U.S. safety database may be insufficient for filing. "Final bone mineral density data from the HANDEL follow-up will be available mid-2012, and Basilea plans to meet with the FDA during [the second half of 2012] to discuss these clinical data, plus [the] need for a risk evaluation and mitigation strategy," she wrote in an analyst note. However, the very fact of the Stiefel deal runs counter to that scenario and, she noted, suggests "that perhaps we are being overly cautious on the likelihood of a straightforward approval."

For Basilea, the deal is about focus as well as cash. "This allows us to focus on anti-infectives and oncology with a greater degree of business synergy," CEO Anthony Man said during a conference call Tuesday.

It could allow the Toctino business to maximize its potential as part of a global dermatology franchise. Jefferies has forecast $250 million in peak sales, $150 million of which would come from the U.S. market.

Last year, Basilea attained just a fraction of that, CHF31 million (US$32.2 million), in sales from the 14 countries in which the drug is available, having earlier revised its forecast down from CHF40 million on the basis of reimbursement delays and foreign currency effects. (See BioWorld International, Jun. 22, 2011.)

Basilea anticipates low double-digit growth in the coming year. Toctino is approved but not launched in another 15 countries. But the transfer of the asset will have little impact on its bottom line. "The revenue we were receiving and the SG&A [selling, general & administrative expenses] we had associated with that were very similar," Basilea's chief operating officer, Ron Scott, said. "The impact of Toctino is fairly cash neutral."

The deal, which could take up to two months to gain antitrust approval, will swell Basilea's robustly healthy bank balance. The company reported a 2011 year-end cash balance of CHF197.1 million. It plans to use its cash developing its existing pipeline of anti-infective and oncology drugs and expanding the clinical pipeline, through either internal discovery or external partnering activities. Later this year, it will file for approval in Europe of ceftobiprole, a broad-spectrum cephalosporin, for the treatment of pneumonia in the hospital setting.

A U.S. filing is contingent on the outcome of upcoming discussions with the FDA, although the company has ruled out any additional trials.

"We are clearly focused on partnering. We do not currently intend to invest in further clinical trials with respect to the U.S. market," Man said.

A broad-spectrum antifungal drug, isavuconazole, which is partnered with Tokyo-based Astellas Pharma Inc., is undergoing Phase III trials at present. Recruitment is slow, however, and top-line data are not expected until next year. Also in clinical development are BAL30072, a sulfactam antibiotic undergoing a Phase I trial, and a cancer drug, BAL101553, which is in a Phase I/IIa trial.

Shares in Basilea (ZURICH:BSLN) peaked at CHF50.85 during early trading Tuesday, a gain of almost 15 percent on Monday's close of CHF44.25. The stock later shed most of those gains, however, to close at CHF46.