BioWorld International Correspondent

PARIS - Cerep SA will cease its loss-making chemistry services and drug discovery research activities as part of a plan aimed at bring it "rapidly back to profitability."

The Paris-based company says it has decided to refocus on its profitable fee-for-service activities, which include in vitro pharmacological and pharmaceutical profiling, high-throughput screening, its BioPrint database and clinical services, in which it says it has a strong competitive position.

At the same time, Cerep intends to look actively for partners to pursue its most advanced drug discovery programs and thus preserve the current value of its drug candidate portfolio.

The company points out that the new chemistry service contracts it had hoped to pick up in 2006 have not materialized. As a result, revenues from chemistry services will be down more than 50 percent this year, at around €2.85 million (US$3.73 million). The chemistry business thus is expected to lose about €3.5 million, not counting associated restructuring costs of an estimated €2 million.

In 2005 Cerep made a pre-tax loss of €5.9 million, as against a profit of €0.8 million in 2004, while its revenues were virtually unchanged at €52.9 million

The company explains that the slump in revenues from chemistry services this year is due mainly to the unfavorable dollar-euro exchange rate and to a sharp growth in competition from Asian countries such as India and China. Given the competitive edge enjoyed by those countries in terms of labor costs, Cerep does not see any possibility for a recovery in the business in the foreseeable future.

In its drug discovery activities, the company's most advanced program is in oncology, where it is developing anticancer agents based on the principle of tumor reversion. Its lead candidate, CER227185, yielded positive results in a recent Phase I/II clinical trial in the indication of refractory or relapsed acute myeloblastic leukemia (AML). However, although the results confirmed the validity and therapeutic potential of the tumor reversion approach, CER227185 caused adverse side effects that are not thought to be linked to the anti-tumoral mechanism of action, but rather to the drug's interaction with unrelated targets present in the central nervous system.

Cerep thus has decided not to pursue the development of CER227185 but to concentrate instead on compounds with reduced off-target effects. One of these is CER233790, a metabolite of CER227185 that shows similar anti-tumor activity as well as good oral bioavailability but does not bind as much to the targets associated with the secondary effects of CER227185. It has demonstrated strong anti-tumor effects both on cell lines from solid tumors (breast, colon, ovary, prostate, skin, brain and pancreas) and on hematological cells of human origin at doses compatible with clinical use.

In addition to its effects on TCTP, the key target in the tumor reversion process, CER233790 has been found to block cell-cycle progression at phase G1. It also arrests protein synthesis in treated tumor cells.

Cerep said that candidate now is ready to enter the pre-IND regulatory phase, but the company has decided not to embark on the clinical development of CER233790 on its own because of the costs. Instead, it wants to find a partner for its entire oncology program. That includes a third generation of compounds, which appear to have a level of anti-tumor activity that is 50 to 100 times greater than CER233790.

Cerep said other programs in its drug discovery portfolio have yielded sufficiently strong early stage results to enable it to conclude license agreements that will ensure an economic return on its research and development investments to date. The costs associated with its drug discovery research activities will have amounted to an estimated €4.5 million in 2006, and they can no longer be financed by the company's service activities.

Cerep has hired a specialized company to find a buyer for its chemistry and drug discovery businesses and has embarked on a procedure aimed at finding alternative employment for 66 employees whose jobs are at risk.