West Coast Editor

Protein Design Labs Inc. nailed down the whopper deal of the year so far with Biogen Idec Inc., which is paying $40 million up front, buying $100 million in equity, and promising up to $660 million in milestones related to three Phase II compounds.

Wall Street rewarded PDL, whose stock (NASDAQ:PDLI) closed Wednesday at $26.24, up $2.94, or 12.6 percent. Biogen Idec's shares (NASDAQ:BIIB) ended the day at $40.69, down 15 cents.

Analyst Christopher Raymond with Robert Baird & Co. in Chicago stayed neutral on Biogen Idec, saying in a research report the "products [in the deal] are far too early stage to move the valuation needle. We remain on the sidelines."

Jennifer Chao, analyst with New York-based Deutsche Bank Securities, was more upbeat in her note, calling the agreement an "intriguing" win for both parties that provides an "opportunity for [Biogen Idec] to acquire multiple shots on goal," while giving PDL a chance to work with an industry leader and spare its own research and development resources.

Chao, who covers PDL, maintained her "buy" rating on the stock and raised the price target from $22 to $28. Analyst David Webber at First Albany in New York did the same, though his previous price target was $25.

The shared-development deal takes in daclizumab for multiple sclerosis (MS) and indications other than transplant and respiratory illness, along with the cancer drug volociximab (also known as M200) and fontolizumab (also known as HuZAF, which has been studied for autoimmune disorders) in all indications.

The "two highest priorities" will be daclizumab and volociximab, said Steven Benner, chief medical officer for Fremont, Calif.-based PDL. Cambridge, Mass.-based Biogen Idec and PDL will share equally the costs of all development activities and all operating profits from each collaboration product in the U.S. and Europe, and jointly will oversee development, manufacturing and commercialization plans.

Each party has co-promotion rights in the U.S. and Europe. Outside those territories, Biogen Idec will fund development and commercialization, paying a royalty to PDL on sales.

Daclizumab, also called Zenapax, is a humanized monoclonal antibody that binds to the IL-2 receptor on activated T cells, inhibiting the binding of IL-2 and the cascade of pro-inflammatory events that lead to rejection of organ transplants, as well as autoimmune and related diseases. A Phase II clinical trial of daclizumab in MS is ongoing, and rights to the compound in transplantation, asthma and related respiratory diseases are held in a partnership with F. Hoffmann-La Roche Inc., of Nutley, N.J. (See BioWorld Today, Sept. 24, 2004.)

Benner said investigators at the NIH and later at the University of Utah performed an open-label study that showed daclizumab, when added to beta-interferon in relapsing MS patients, yielded improvement. More studies were conducted in Utah to support the finding.

"We've now taken that into a 270-patient control trial that will look at two doses compared to placebo," Benner said, adding that future development will involve a subcutaneous formulation, whereas the previous route was intravenous.

Volociximab is a novel anti-angiogenic chimeric antibody directed against alpha5 beta1 integrin, the binding of which can block new blood vessels and slow tumor growth. Three Phase II trials of volociximab - in renal cell carcinoma, melanoma and pancreatic cancer - started in the first half of 2005. A fourth in non-small-cell lung cancer is expected to begin shortly, and preclinical data suggest the drug might work against age-related macular degeneration.

"We're nearing the halfway mark for accrual of those first three studies," Benner told BioWorld Today, and data are expected at next year's meeting of the American Society of Clinical Oncology.

Fontolizumab is a humanized antibody that binds to interferon-gamma, an immunoregulatory cytokine with multiple activities, including up-regulation of MHC Class II molecule expression. Blocking interferon-gamma may be useful in treating a variety of autoimmune diseases, and fontolizumab has been tried against Crohn's disease, though last fall PDL reported the drug missed its primary endpoint at day 28 in two Phase II trials. (See BioWorld Today, Sept. 7, 2004.)

Benner said "two unfortunate factors" likely led to the disappointing outcome of those trials - the dose was too low, and needed repeating.

"The next step is probably a pilot study in rheumatoid arthritis that we plan to get under way later this year," he said, explaining that the company was moving to RA because "the next step in Crohn's would really be large, randomized trials," and clinical supply of the drug might not be adequate.

"We're interested in seeing whether we can branch out into other diseases," he said.

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