With slower-than-expected sales growth of Bexxar, Corixa Corp. decided to turn worldwide rights for the non-Hodgkin's lymphoma product over to partner GlaxoSmithKline plc.
The transfer means Seattle-based Corixa will lay off about 43 percent of its work force, or 160 people total. The company is essentially reducing its burn rate from $65 million this year to less than $30 million next year so it can focus its resources on its adjuvants and TLR4 compounds.
"We continue to believe in the promise of Bexxar," Steven Gillis, Corixa's chairman and CEO, said in a conference call Tuesday. "But unfortunately, Bexxar's commercial acceptance is coming at a pace that is too slow for Corixa to continue to fund."
Corixa's stock (NASDAQ:CRXA) fell 12.8 percent Tuesday, or 59 cents, to close at $4.01.
London-based GSK will be responsible for the worldwide manufacturing, development and commercialization, beginning Dec. 31. As part of the agreement, Corixa is transferring all of its Bexxar-related assets to GSK, including the rights to commercialize the product in Canada. GSK also is assuming Corixa's relationship with the Australian Nuclear Science and Technology Organization for the commercialization of the product in Australasia. And GSK gets the European rights, recently returned to Corixa from GE Healthcare, formerly Amersham Health.
A major benefit to Corixa is the cost-savings, but the company also will continue to receive development and sales milestones, as well as royalties based on Bexxar sales in the U.S., Canada and Australasia.
"I think it is a good move for the company," said Greg Wade, analyst with San Francisco-based Pacific Growth Equities. "The ramp-up of Bexxar has been a lot slower than analysts and the company expected, and has caused a drain on the company's resources."
Wade, who does own stock in Corixa, said physicians have been more comfortable prescribing therapies such as Rituxan and it has been a challenge to get them to use radiotherapy at an earlier stage of the disease.
But Wade believes there will be more acceptance of Bexxar in 2005, making things easier for GSK.
"Changes to CMS reimbursement for these therapies could cause physicians to refer patients to hospitals earlier," Wade told BioWorld Today.
The transfer of Bexxar is costing 160 Corixa employees their jobs from the company's South San Francisco and Seattle facilities. Following the reductions, the company will have about 220 employees in Seattle and Hamilton, Mont.
Beginning this quarter and continuing through the middle of next year, Corixa expects to incur non-cash charges of up to $4.5 million and cash charges of up to $5.5 million for the transfer of Bexxar to GSK and the work force reduction.
The company expects to incur additional non-cash charges as it enters potential sublease arrangements in the future.
"I think the actions that we've taken today place us on a much stronger financial footing, and as a result of that, we currently have no plans to raise additional debt or equity capital," Gillis said. "We have sufficient monies to take us through to cash-flow breakeven and profitability."
The company reported cash, cash equivalents and investments of $134.4 million at the end of the third quarter. Gillis estimated that cash-flow breakeven could occur sometime in 2007, assuming approvals of vaccines that contain Corixa's flagship adjuvant, MPL, and the partnering of some TLR4 products.
In addition to selling Bexxar to GSK, Corixa intends to sell or transfer its cancer vaccine and antibody target portfolios to existing or new partners. That includes two Phase I products for breast cancer and lung cancer.
With a good part of its oncology portfolio in other hands, the company plans to focus its resources on its adjuvants and TLR4-based innate immunity products. The company's adjuvant MPL is present in several vaccines that are nearing product approval worldwide.
Corixa has MPL products in Phase III development for herpes, hepatitis B, allergies and human papillomavirus. The company's MPL adjuvant manufacturing and supply contract with GSK entered earlier this year will provide Corixa with a steady source of revenue through 2012.
As for its TLR4 compounds, which are designed to trigger or inhibit the body's innate immune system, Corixa's CRX-675 product is in Phase I trials to improve seasonal allergic rhinitis. Several other TLR4 compounds might act as stand-alone therapeutics for additional indications. One product, CRX-527, likely will move into Phase I trials in an infection-prevention setting sometime in 2005, Gillis said.
Wade said Corixa's adjuvant business presents the company with a large market opportunity. The TLR4 program also offers the company a lot of promise.
"We think that this class of drugs could be potentially broadly used for inflammatory disorders and allergic disorders, as well as for infection," Wade said.
Both GSK and Corixa will continue to equally share royalties on the sales of the non-Hodgkin's lymphoma drug Zevalin, according to the patent litigation settlement with Biogen Idec Inc., of Cambridge, Mass. That dispute, which involved patent-infringement claims on the products and processes related to the radioimmunotherapies Bexxar and Zevalin, was settled in March. (See BioWorld Today, March 2, 2004.)
Bexxar, which consists of an antibody specific to the CD20 antigen on B cells conjugated to radioactive iodine-131, received FDA approval in June 2003. Corixa reported in November that Bexxar sales were $2.5 million in the third quarter, compared with $2.2 million in the second quarter.
Following Bexxar's approval, Corixa decided to reduce its work force by 18 percent in November 2003 to save about $8 million annually. The company said at the time that Corixa's research had more opportunities than the company could financially pursue. On the chopping block then was Melacine, the company's vaccine for melanoma that required an additional Phase III trial that would take five to seven years to complete. (See BioWorld Today, Nov. 10, 2003.)