Washington Editor

GlycoGenesys Inc. saw its stock value spike 20 percent on news of a favorable ruling in licensing-related arbitration proceedings with its former CEO, David Platt.

The Boston-based company added that separate litigation with Platt and his new company, Pro-Pharmaceuticals Inc., does not affect GlycoGenesys' rights to GCS-100, its lead product in development for cancer. The other suit involves Davanat, a compound being developed by Pro-Pharmaceuticals.

The disagreements surfaced more than four years ago, when in May 2000, Platt signed a termination agreement, stepped away from GlycoGenesys and agreed not to compete with his former company. In 1994, Platt had licensed rights to GCS-100 to GlycoGenesys, but that licensing deal quickly turned into a source of contention following his departure.

With closure to the disagreement apparently at hand, shares in GlycoGenesys (NASDAQ:GLGS) gained 8 cents to close at 48 cents by the end of Friday's trading. Pro-Pharmaceuticals' stock (AMEX:PRW) dropped 32 cents, or 14.9 percent, to close at $1.83.

Executives at GlycoGenesys declined to comment on the decision, but in a news release said a "cloud that has overshadowed" the company had been lifted.

Relative to the arbitration, brought by GlycoGenesys against Platt, the company said the ruling affirms its exclusive rights to GCS-100-related intellectual property. Platt, as inventor of GlycoGenesys' lead product, continues to prosecute patent applications covered by the license agreement for the benefit of GlycoGenesys.

Company officials at Newton, Mass.-based Pro-Pharmaceuticals did not return calls seeking comment, though in a news release Platt said he was "gratified by the arbitrator's decision" to allow him to continue to control the patent applications' prosecution.

Low-dose levels of GCS-100 have been evaluated in Phase IIa trials for both colorectal and pancreatic cancers, with stable disease and partial responses documented. GlycoGenesys now is conducting a dose-escalation Phase I trial to evaluate higher doses of GCS-100LE, a low-ethanol formulation of GCS-100. Further studies of GCS-100LE are planned to begin early next year.

The arbitrator found that Platt had breached the license agreement by filing a patent application related to those already covered by the agreement without having informed GlycoGenesys, affirming the company's position that Platt's subsequent patent application also is covered by the agreement. The arbitrator rejected Platt's contention that GlycoGenesys had breached the 1994 license agreement, and also refused to terminate the agreement as Platt had requested.

Early this year, Platt filed a separate litigation against GlycoGenesys, seeking monetary damages in connection with his termination agreement. In response, GlycoGenesys filed several counterclaims against Platt and Pro-Pharmaceuticals targeting that company's core intellectual property, including Davanat, its lead product. It is seeking the assignment of Davanat to GlycoGenesys, and to prevent Platt and Pro-Pharmaceuticals from developing and selling polysaccharides to treat cancer.

Two months after Platt signed his termination agreement with GlycoGenesys, he incorporated Pro-Pharmaceuticals to develop carbohydrate-based drugs and drug-delivery products in the field of oncology. In early 2001, GlycoGenesys stopped severance payments under the termination agreement because of what it alleged were Platt's competitive activities with Pro-Pharmaceuticals, as well as other breaches of the termination agreement.

Backing up its claims, GlycoGenesys has a U.S. patent titled "Method for Enhancing the Effectiveness of Cancer Therapies" covering the use of GCS-100 and other carbohydrates that bind to galectins prior to or in combination with chemotherapy or surgery for the treatment of cancer. Davanat, a carbohydrate administered in combination with existing chemotherapies to potentially enhance their efficacy and reduce their toxicity, binds to galectins, GlycoGenesys said.

Pro-Pharmaceuticals countered that Davanat is a target delivery system that enables the delivery of chemotherapy drugs to cancer cells, and is not an active pharmaceutical ingredient like GCS-100. The company added that the products are two distinctly different therapeutic entities, differing in chemistry and biological activity, as well as therapeutic classes.