BioWorld International Correspondent

SYDNEY, Australia - The share price of Peplin Ltd. dropped sharply last week when the company announced that Allergan Inc. was ending an agreement to develop a skin cancer product based on a Peplin cancer compound.

Allergan, of Irvine, Calif., said its decision was not a commercial judgment on Peplin's product, known as PEP005, as it still believes the product has potential. Instead, the company said it was focusing on "core programs" that will achieve the highest returns.

Peplin also issued a release that repeated those points, as well, noting the favorable separation deal it had received - including a cash payment of $1.3 million, plus a completion of Phase I trials on actinic keratosis (sun spots) at Allergan's expense - and stating that it is in a strong position to re-license the product.

Investors were not reassured. Peplin's shares fell around 26 percent to A$0.52. They recovered slightly by the end of the week to A$0.56.

Peplin Chief Financial Officer Philip Baker said that when the original license deal was done, other pharmaceutical companies showed interest in PEP005. So the company doesn't expect much trouble in finding another partner.

Chemically described as 3-angeloyl ingenol, PEP005 is being developed in several forms. The form Allergan was developing, known as PEP005 topical, is for the treatment of both actinic keratosis and non-melanoma skin cancer.

Peplin Managing Director Michael Aldridge said Peplin assumed immediate control of the development process of PEP005 topical, to ensure the product's scheduled progression to Phase II trials in 2005. Allergan also agreed to help Peplin secure a new collaborative partner.

He said Allergan has a "rich and full" development pipeline for 2005, and it became apparent to Peplin only last week that Allergan was not in a position to commit unequivocally the resources required for the project.

In the Allergan statement, Scott Whitcup, executive vice president, research and development, said that "Allergan maintains a disciplined portfolio-planning process that seeks to ensure a focus on core programs that project the highest return and is concentrating resources on high potential products with approvals expected between now and 2008.

"PEP005 was one of the technologies which did not make the funding list for 2005," he said.

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