Only eight months after Zephyr Sciences Inc. in-licensed Neuprex and related bactericidal/permeability-increasing protein (BPI) products, XOMA Ltd. decided to terminate the agreement, because Zephyr had not met its financial requirements.

The potential $73 million deal signed in November gave new hope for Neuprex, a product developed for several indications but one that has hit roadblocks along the way, including a pullout by partner Baxter Healthcare Corp.

Despite a second terminated deal, this time with Zephyr, XOMA remains focused on its BPI products, stressing their excellent safety profiles in pediatric and adult indications.

"We're definitely committed to it," said Deb McManus, XOMA's manager of corporate communications. "We do believe that it is a very promising opportunity. We just need to find the appropriate indications, as well as the right partners who can advance this."

McManus declined to say how much of the $73 million had been paid by Zephyr to Berkeley, Calif.-based XOMA. The original agreement called for $11 million in license fees and up to $62 million in milestone payments, as well as royalties. (See BioWorld Today, Nov. 12, 2004.)

Likewise, Aaron Davis, Zephyr's director of business development, declined to give specific reasons for the termination or the amount of money that changed hands. New York-based Zephyr had evaluated several undisclosed therapeutic indications for Neuprex and was prepared to move forward, he said.

"We liked this asset very much and had a great plan," he told BioWorld Today. "We enjoyed working with XOMA. There was just an unfortunate combination of events that triggered the termination of this deal."

Founded in 2003, Zephyr looks for products that need re-positioning. The BPI license was its first in-licensing deal, and there are currently no other products in development at Zephyr.

Davis confirmed that Zephyr's inability to meet financial obligations was partly responsible for the termination. He could not say whether or not Zephyr would continue to in-license products or if it would dissolve as a company.

"Management and the board are determining all of the next steps, and everything is being considered," he said.

Neuprex is an injectable formulation of a modified recombinant fragment of BPI, a human protein found in certain white blood cells. BPI is one of the body's natural defenses against bacterial infections and Neuprex is the first drug XOMA developed from BPI. The protein was discovered by Peter Elsbach and Jerrold Weiss at New York University School of Medicine, which has worked in collaboration with XOMA since 1991 to bring a product to the market.

But it has been a bumpy road for Neuprex. XOMA stopped in 1999 a Phase III trial to prevent infection in hemorrhagic trauma patients, because an interim analysis showed it would not reach statistical significance. Then, in 2000, the FDA decided that XOMA did not have enough data to file a biologics license application for Neuprex in meningococcemia. (See BioWorld Today, Sept. 28, 1999, and April 26, 2000.)

Three years later, Deerfield, Ill.-based Baxter ended its partnership with XOMA after development of Neuprex in systemic anti-infective and anti-endotoxin indications was halted. (See BioWorld Today, July 9, 2003.)

McManus said the problems with Neuprex have nothing to do with safety, and very little to do with efficacy.

"I think there's been some difficulty in finding the right indication with the patient groups that have been involved," she said. "But I don't think that characterizes anything badly about the compound itself, or the efficacy."

Neuprex is being studied in a Phase I/II trial with Children's Medical Center Dallas in pediatric patients with congenital heart abnormalities requiring open-heart surgery associated with cardiopulmonary bypass. The product also has been evaluated in Crohn's disease.

The agreement with Zephyr did not cover BPI products such as XMP.629. That drug proved inconclusive last year in a Phase II trial for acne. (See BioWorld Today, Aug. 18, 2004.)

"Certainly, the outcomes of the study were not as conclusive as we would have liked them to have been," McManus said. But XOMA plans to continue development, and is "looking for partners who have a lot more expertise in that area."

In 2003, XOMA halted development of a Phase I heart drug, MLN2201, after results showed it did not meet predetermined criteria. That drug was partnered with Cambridge, Mass.-based Millennium Pharmaceuticals Inc. The companies have continued to work together on CAB-2, a recombinant protein in Phase I development for reducing the incidence of post-operative events in coronary artery bypass graft surgery patients.

XOMA also is working in Phase I with Emeryville, Calif.-based Chiron Corp. on an anti-CD40 antibody for treating B-cell tumors. And it is working with Philadelphia-based Aphton Corp. on anti-gastrin antibody candidates for gastrointestinal cancers.

XOMA has one approved product - the psoriasis drug Raptiva, which is partnered with South San Francisco-based Genentech. Second-quarter sales came in at about $21.3 million. In January, XOMA restructured its Raptiva agreement with Genentech, replacing a U.S. cost-and-profit sharing arrangement and an ex-U.S. royalty arrangement with a worldwide royalty arrangement. (See BioWorld Today, Jan. 14, 2005.)

As of March 31, XOMA had $61.7 million in cash, cash equivalents and short-term investments, reflecting $56.6 million in net proceeds from a convertible note offering completed in February.

"We feel that we're very well-positioned for the next few years in terms of having all of the necessary resources to operate," McManus said.

XOMA's shares (NASDAQ:XOMA) dropped 6 cents Monday to close at $1.82.

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