Shares in Basilea Pharmaceutica AG gained as much as 6 percent during mid-morning trading Tuesday on news that it secured a contract from the U.S. Biomedical Advanced Research and Development Authority (BARDA), worth up to $89 million, for the development of its antibiotic, BAL30072.

The stock (ZURICH:BSLN) closed Tuesday at CHF67.15 (US$71.50), up CHF3.05, or 4.8 percent.

The first $17 million of funding will be awarded on the successful completion of a pre-defined work package over 22 months.

Basel, Switzerland-based Basilea would receive the total contract award if it hits microbiological, preclinical, clinical, manufacturing and associated regulatory milestones over a six-year period. Phase I development of the drug is ongoing and will continue next year.

The BARDA funding covers both biodefense and civilian aspects of BAL30072's development. "It will reduce the R&D costs for Basilea for this program," Basilea spokesman Peer Nils Schroeder told BioWorld Today.

The drug is a monosulfactam with an attached dihydroxypyridone moiety, which is thought to accelerate intracellular uptake of the drug via the siderophore receptors of the target pathogen's iron transport system.

BAL30072 has demonstrated activity against a range of gram-negative bacteria, including multidrug-resistant Pseudomonas aeruginosa strains and Acinetobacter species. It is being developed for treating severe nosocomial infections.

Schroeder identified Burkholderia pseudomallei as one of the biothreat agents that will now be included in its development program.

Previously classified as a Pseudomonas species, Burkholderia pseudomallei causes melioidosis (also called Whitmore's disease), an often-fatal infection that can lie dormant for many years.

Basilea will seek a development partner for BAL30072, although the timing of such a move is not yet clear. The BARDA funding could fuel the program further along the development pathway.

Basilea is not short of cash in any case. It swelled its coffers last year by disposing of its hand dermatology drug Toctino (alitretinoin) to Stiefel Laboratories Inc., a subsidiary of London-based Glaxosmithkline plc, for £146 million (US$226 million) up front plus additional milestones and sales royalties. (See BioWorld Today, June 13, 2012.)

The company recently gained U.S. orphan drug designation for its antifungal drug isavuconazole, which is partnered with Tokyo-based Astellas Pharma Inc. Data from two Phase III studies are due later this year.

The original deal has CHF478 million in development and sales milestones attached. (See BioWorld Today, Feb. 25, 2010.)

Basilea still is seeking a partner for ceftobiprole, an intravenous cephalosporin antibiotic that is undergoing regulatory review in Europe for hospital-based treatment of pneumonia. "We expect a decision in the second half of this year," Schroeder said.

It is unclear whether the FDA will accept the same dossier. "We are in consultations with the FDA regarding the requirements for a potential filing for pneumonia in the U.S. We will update the market when we have more clarity," he said.

The company exited 2012 with CHF344 million in cash, CHF48 million of which it recently distributed to shareholders.