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Data Monitoring Deficiencies Sink Ceftobiprole Once Again

Assistant Managing Editor

Basilea Pharmaceutica AG's antibiotic ceftobiprole failed for the third time to clear FDA review due to data integrity issues, news that sent shares falling 15 percent but could give the Swiss company more ammunition in its ongoing arbitration process claiming damages against partner Johnson & Johnson.

In a worst-case scenario, the agency pointed to unreliable or unverifiable data from 10 of the 49 audited clinical sites, as well as monitoring inadequacies relating to safety or efficacy findings, and recommended that J&J conduct two new Phase III studies of ceftobiprole in complicated skin and skin structure infections. J&J said it intends to work with the FDA to determine the "best path forward," but the delay is significant enough for many analysts to virtually write off ceftobiprole, at least the U.S.

Overseas, the product might still have a chance - albeit a slim one, given that European regulators initiated their own data inspection early this year, following the FDA's second rejection.

That inspection recently concluded, CEO Anthony Man told investors and analysts on a conference call, and the European Medicines Agency is expected to make a decision in the first quarter of 2010.

"I frankly do not know whether there will be a request for any new studies," Man said.

At the very least, the latest complete response letter gives further support to Basilea's claim that New Brunswick, N.J.-based J&J and subsidiaries, including J&J Pharmaceutical Research & Development LLC, failed to live up to their part of the companies' agreement, under which J&J gained exclusive worldwide rights to ceftobiprole and agreed to take on responsibility for funding and conducting the Phase III program.

Analyst Richard Parkes, of Piper Jaffray, is optimistic that the outcome of arbitration process, expected by the end of 2010, will be favorable for Basilea, which could "clawback significant milestone payments and receive additional damages."

Basilea launched its claim against J&J in February, just after EU delay. The Basel, Switzerland-based company is seeking unspecified damages - relating to milestone payments that would have been received upon regulatory approvals - and is alleging that J&J breached the companies' licensing agreement.

In addition to the two complete response letters pointing to data integrity issues, the FDA also smacked J&J with a warning letter in August, for failing to ensure proper monitoring and study protocol at ceftobiprole clinical trial sites. (See BioWorld Today, Aug. 20, 2009.)

But the latest ceftobiprole delay could have other implications for Basilea. Piper Jaffray's Parkes believes the firm to be a potential takeover target, based on the value of Toctino, which has gained approval in Canada and Europe to treat hand eczema that does not respond to corticosteroids.

"We believe an acquirer could pay between CHF80/share and CHF125/share on this basis alone," he wrote in a research note.

Based on about 9.6 million shares outstanding as of June 30, that would value Basilea between $739 million and $1.2 billion.

Meanwhile, Basilea, which had about CHF224 million (US$216.1 million) in cash as of its last financial report, is focusing attention on commercialization activities for Toctino, as well as ongoing Phase III trials of the product for U.S. approval.

The company also is in pivotal studies with Isavuconazole, a broad-spectrum antifungal agent for severe invasive fungal infections, with results anticipated in 2011. It currently owns all rights to the product but has "been in discussions with partners for some time," said Ronald Scott, Basilea's chief financial officer, adding that the firm is "making progress."

Shares of Basilea (Swiss:BSLN) fell CHF11.70 to close Wednesday at CHF64.45.

Published: December 31, 2009