Advancis Pharmaceutical Companies Inc., which recently cut about a third of its staff following two Phase III misses with its Amoxicillin Pulsys product for strep throat, was dealt another blow with the loss of its partner for the once-daily antibiotic.

Spring Valley, N.Y.-based Par Pharmaceutical Corp. terminated the agreement with Advancis, signed in 2004, for late-stage development and commercialization of Amoxicillin Pulsys, a formulation of amoxicillin using Advancis' delivery technology. The Pulsys system is based on the concept that bacteria are killed more efficiently by antibiotics released in waves.

Shares of Advancis (NASDAQ:AVNC) fell as low as $1.26 Thursday morning before rebounding to close at $1.32, up 1 cent.

Before bowing out of the agreement, Par met all current obligations, including a third-quarter research and development payment of $4.75 million to Advancis. Par's next installment would have been another $4.75 million, but the termination means "we expect no payment in the fourth quarter," Edward Rudnic, Advancis' chairman, president and CEO said during a conference call.

Par, which spent about $23 million on the Amoxicillin Pulsys program, also might be entitled to receive a share of the net profits for up to half of its investment if the product achieves marketability in the future.

"We were very surprised and disappointed with the results of the Amoxicillin Pulsys Phase III trials that we've received in the past few weeks," Rudnic said. The Germantown, Md.-based company will continue analyzing data to determine whether to "undertake the expense for new pivotal trials," which will occur "if, and only if, we have a high degree of confidence for a positive outcome."

Results reported in June from the first Phase III trial, evaluating 775-mg Amoxicillin Pulsys tablets in adult and adolescent patients with pharyngitis/tonsillitis due to Group A streptococcal infections for a seven-day treatment period, failed to show statistical non-inferiority to a 10-day treatment of 25 mg of penicillin administered four times per day. Based on throat cultures taken at the end of treatment, the drug also fell short of the 85 percent bacterial eradication rate set by the FDA, recording eradication of 76.6 percent. (See BioWorld Today, June 16, 2005.)

Last month, Advancis reported that top-line data from its second Phase III trial also missed its endpoint of demonstrating non-inferiority to penicillin. That trial studied a "sprinkle" formulation of Amoxicillin Pulsys in pediatric patients, administered in either 475-mg or 775-mg doses, depending on the children's ages, for a period of seven days. The bacterial eradication rate in the pediatric trial was 65.3 percent. (See BioWorld Today, July 25, 2005.)

"Before we make any decisions to proceed, we need to complete further analysis to know why Amoxicillin Pulsys failed to reach 85 percent," Rudnic said, adding that the company would consider modifying the parameters of the study to increase dosing levels or treatment period. He added that focus likely would be placed in the adult and adolescent population, since that trial came closest to meeting FDA requirements.

If Advancis decides further development is warranted, the company could be entering new Phase III trials as early as this fall if no reformulation is needed.

"We are aware that we might not get another chance to prove that our once-a-day Pulsys technology works," Rudnic said. "So we much view this opportunity as critical."

The termination of its partnership with Par means that Advancis owns sole rights to the product. But it also means moving forward without Par's help to offset the clinical costs.

"We can look at other partnering opportunities," said Steve Shallcross, chief financial officer for Advancis.

The company already has taken steps to reduce its cash burn. Late last month, Advancis cut 33 jobs, including six corporate officers, to save about $4.1 million annually. Those cuts left the firm with 54 employees, and marked the second restructuring for Advancis in less than a year. The company reduced its work force from 106 employees to 87 in November 2004 after its collaborator, London-based GlaxoSmithKline plc, ended a year-old agreement to use Advancis' Pulsys technology with Augmentin for strategic reasons. Also that year, Par terminated an agreement with Advancis to create a generic version of Abbott Park, Ill.-based Abbott Laboratories' Biaxin XL, after it tested poorly in some studies. (See BioWorld Today, Aug. 1, 2005, and Nov. 22, 2004.)

The company posted a net loss of $9.3 million, or 34 cents per share, for the quarter ending June 30. Cash, cash equivalents and marketable securities totaled $40.3 million.

Shallcross said the company withdrew its previous guidance for 2005 - which earlier this year anticipated a net loss between $35 million and $40 million, or about $1.50 to $1.75 per diluted share - and declined to provide updated guidance or an expected burn rate at this time.

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