West Coast Editor

Hoffmann-La Roche Inc.'s decision to back out entirely of the deal with PDL BioPharma Inc. for Zenapax (daclizumab) leaves intact the biotech firm's main revenue sources - as well as a separate pact with Biogen Idec to develop the same antibody in multiple sclerosis - and Wall Street nipped PDL shares only slightly on the Roche news.

PDL's stock (NASDAQ:PDLI) closed Friday at $22.51, down 16 cents.

Nutley, N.J.-based Roche and PDL will formally terminate their arrangement next May. Begun in 1989, when Roche acquired worldwide rights to daclizumab, the deal took its first turn in 2003, when Roche returned them, except in the area of organ transplants. The following year, Roche picked up co-development rights of a subcutaneous version for respiratory disorders, but several months ago, Roche dropped development in asthma, despite encouraging Phase II results. (See BioWorld Today, Aug. 31, 2006.)

Now, the organ-transplant is going by the wayside, as well. A Phase II trial had been expected to start next year. "Although this [Roche] news is somewhat disappointing, we did not estimate substantial revenues to PDL from daclizumab" in organ transplants, wrote Bret Holley, analyst with CIBC World Markets. Company officials could not be reached.

Analyst Mark Monane, with Needham & Co., agreed that the latest development will have scant impact on Fremont, Calif.-based PDL, whose key drivers remain royalty streams from blockbuster antibodies such as Avastin (bevacizumab) for colorectal cancer, Herceptin (trastuzumab) for breast cancer and Lucentis (ranibizumab) for age-related macular degeneration, all from South San Francisco-based Genentech Inc.

PDL, of Freemont, Calif., also gets income from marketed products such as the calcium channel blocker Cardene (nicardipine hydrochloride), the only FDA-approved intravenous drug for short-term treatment of hypertensive crisis - a growing problem in the U.S., where about 3 million patients were treated with I.V. agents last year.

PDL gained Cardene in its 2005 acquisition of Edison, N.J.-based ESP Pharma Inc., in a deal valued at $475 million. ESP got the drug from Wyeth Pharmaceuticals Inc., and sales rose fast from the re-launch in 2002, achieving $6 million that year and almost $80 million in 2005. (See BioWorld Today, Jan. 26, 2005.)

"Our cardiology contacts believe that the market for Cardene in acute hypertension crisis remains relatively underpenetrated and that the drug is underpromoted," Monane wrote in a research report. "Although the patent for Cardene is set to expire in late 2009, we believe [PDL] is working hard on lifecycle management (i.e., pediatric exclusivity) for Cardene." Calling the drug PDL's key driver for the next several years, Monane projected sales of $107 million this year, exceeding $133 million by 2008.

In the PDL pipeline are ularitide for acute decompensated heart failure and terlipressin for Type I hepatorenal syndrome, as well as Nuvion in a Phase II/III ulcerative colitis trial and Phase II studies in Crohn's disease. Ularitide, for which PDL is seeking a partner, also is in Phase II. Terlipressin, which also came from the ESP buyout, failed in a Phase III trial this summer. (See BioWorld Today, Aug. 7, 2006.)

With Cambridge, Mass.-based Biogen, PDL expects to report data next year from the Phase II CHOICE study, testing daclizumab in combination with beta-interferon for the potentially more lucrative indication of MS. Meanwhile, the firm is sorting potential partners for the drug in asthma. PDL promised an update on the expected financial impact of Roche's latest move, along with any further news on plans for daclizumab in transplant maintenance, during the 2006 earnings call in February.

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