BioWorld International Correspondent

Basilea Pharmaceutica AG entered a worldwide agreement with Johnson & Johnson subsidiary Cilag AG International for the development, manufacturing and marketing of its cephalosporin antibiotic ceftobiprole, which is undergoing a Phase III trial in patients with complicated skin and skin-structure infections.

The Basel, Switzerland-based company could receive up to CHF370 million (US$302.9 million), comprising an up-front payment and defined clinical, regulatory and sales milestones.

"We anticipate that approximately 20 percent of that payment will be made this year," Basilea chief financial officer Ron Scott said.

In addition, the company would earn what it called "significant" double-digit royalties on worldwide sales, and it has retained an option to co-promote the product in the U.S., in major European countries and in Japan and China. Johnson & Johnson, of New Brunswick, N.J., has taken on development costs for the Phase III and registration program and also has become the investigational new drug application holder for the compound. Basel-based F. Hoffmann-La Roche Ltd., which spun out Basilea in 2000, originally held an option on the compound, but decided not to pick it up last year. (See BioWorld International, May 26, 2004.)

Ceftobiprole, which has a broad spectrum of activity against Gram-negative and Gram-positive bacteria, including methicillin-resistant Staphylococcus aureus, also is entering Phase III studies in patients with hospital-acquired pneumonia.

"The pneumonia trials are planned to start in the first half of this year," said Basilea CEO Anthony Man.

News of the deal pushed Basilea's shares above its initial public offering price of CHF98 for the first time since its debut on the Swiss Stock Exchange last March. It rose almost 12 percent to close at CHF103 Thursday, although it ended Tuesday at CHF100.50.

Robin Campbell, senior biotechnology analyst at Jefferies International in London, told BioWorld International the agreement was "potentially a transformational deal" for the company. Analysts had forecast peak sales of $600 million for the product, had Basilea developed it in house, or a figure of $1 billion with a partner.

"I think there's more of an emphasis on that top figure now," Campbell said. Moreover, J&J's "muscular wallet" will enable it to reach peak sales more quickly. "In my opinion, positives outweigh the negatives in the transaction," he said.

Markus Metzger, analyst at the Cologne, Germany office of Vontobel Securities AG, set a more cautious tone. "In terms of valuation, I don't see much difference compared to the time of the IPO," he told BioWorld International. "The only thing that is different [from what Roche would have offered] is the option to co-market the drug later on."

Basilea is outright owner of a second compound undergoing a Phase III trial, alitretinoin (BAL4079), which is in development for chronic hand dermatitis. It also is developing a Phase II antifungal azole, BAL8557, on which Roche retains an option.

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