BioWorld Today Correspondent

GPC Biotech AG emerged successfully from its legal dispute with partner Spectrum Pharmaceuticals Inc., although the circumstances surrounding the case altered radically in the interim.

A three-person arbitration panel, appointed by the American Arbitration Assoc., unanimously rejected all claims brought by Irvine, Calif.-based Spectrum against GPC regarding their co-development agreement for satraplatin, in development for hormone refractory prostate cancer.

However, the disputed asset has shed most of its value since Spectrum originally launched the case last December.

Last week, Martinsried, Germany-based GPC reported that satraplatin failed to demonstrate any overall survival benefit in a 950-patient Phase III clinical trial. Median survival was 61.3 weeks for the satraplatin arm vs. 61.4 weeks for the placebo arm.

But the ruling is "definitely more" than academic, GPC spokesman Martin Braendle said, as it relieves GPC of any obligation to pay Spectrum a share of the proceeds it obtained when licensing European rights to satraplatin to Boulder, Colo.-based Pharmion Corp. "Paying some of that money to Spectrum would have hurt us," he said. The decision "clarifies things regarding that asset."

Moreover, GPC has not abandoned all hope in the drug. Pharmion filed a marketing authorization application with the London-based European Medicines Agency (EMEA) in June, the cornerstone of which are progression-free survival data. Although the FDA's Oncologic Drugs Advisory Committee rejected GPC's method for measuring that endpoint in July, the EMEA will assess it differently, Braendle said. "It will probably be an uphill battle - as Pharmion put it," he said.

Analysts are more doubtful that satraplatin can make any headway in prostate cancer. "The EMEA knows the survival data," Martin Possienke, analyst at Equinet AG in Frankfurt, said. "I don't think so," said Markus Metzger, analyst at Vontobel AG, of Zurich, Switzerland, when asked if the Pharmion application might succeed.

GPC is analyzing the trial data further to ascertain what happened in the trial. "The signs were not that good [after the FDA ruling], but nobody expected that there would be no difference between satraplatin and the placebo arm of the study," Possienke said. The approval of taxotere for treatment of prostate cancer during the protocol might have been a confounding factor but the question has yet to be assessed conclusively.

GPC will complete the subgroup analysis and will continue to explore satraplatin's potential in other indications. It is undergoing a Phase II clinical trial in combination with tarceva in non-small-cell lung carcinoma and is undergoing Phase I/II studies in various other cancer settings.

"It's not that it has no value at all. The question is whether GPC is in a position to explore this value," Possienke said. The company's management has lost credibility with investors and, although it could have between €65 million (US$94.5 million) and €70 million cash by year-end, it will have difficulty raising any more cash from the public market, he said.

Partnering options also will remain limited. "I don't think any major pharma company would jump into the program right now," Metzger said. The company will need to generate more clinical data over the next six to 12 months to clarify satraplatin's potential. The disposition of GPC's largest shareholder, software entrepreneur Dietmar Hopp, could have an important bearing on the company's future, he said.

Further information about the company's immediate plans are expected Thursday, when GPC reports its third quarter results. The trial failure is not just a setback for GPC, but also for the wider biotechnology sector in Germany. The satraplatin development program was considered the sector's brightest hope at the beginning of 2007. Additional Phase III drug candidates, such as Aachen-based Paion AG's stroke drug desmoteplase, also failed to pass muster during the year, leading to widespread disillusionment.

"Investors are not that crazy any more about German biotech, which is difficult for the more successful companies," Possienke said. Sentiment is likely to shift away from drug developers and toward service-based companies such as Venlo, The Netherlands-based Qiagen NV and Martinsried, Germany-based Morphosys AG, Metzger said.

GPC's stock (Frankfurt:GPC) rallied somewhat this week, after hitting a five-year low of €2.66 last week. It closed Tuesday at €4.08.