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About a year after regaining from F. Hoffman-La Roche Inc. the rights to Zenapax (daclizumab) in all rights except transplant rejection, Protein Design Labs Inc. signed a potential $205 million deal for Roche to co-develop and sell the Phase II compound for asthma and related respiratory diseases.

PDL's stock (NASDAQ:PDLI) closed Thursday at $20.28, down 6 cents.

The deal means more money for PDL's push to transform itself into a company that relies on its own product sales, said James Goff, senior director of corporate communications for Fremont, Calif.-based PDL.

"The goal is to get our first products on the market by 2007," he said.

Roche, of Nutley, N.J., which already markets Zenapax for kidney transplant rejection, is providing $17.5 million up front, with the rest due as milestone payments. The firms will globally co-develop daclizumab in moderate to severe asthma, splitting development expenses and co-promoting the product in the U.S. PDL gets royalties on net sales for asthma outside the U.S. as part of the deal.

Roche acquired the worldwide rights to daclizumab in 1989 but in October 2003 resold to PDL all rights to the drug except for use in transplant rejection until 2006, when PDL has an option to re-acquire those rights, too, Goff said. Earlier this year, PDL brought what the company called "compelling" Phase II data to Roche, which led to the new agreement. (See BioWorld Today, Oct. 1, 2003.)

The Phase II study used an intravenous formulation. PDL now plans to do a Phase I study with a new, subcutaneous version of Zenapax.

"We felt it makes sense to do a small Phase I study and have that data available should the FDA request it," Goff told BioWorld Today. The Phase I study will start in the fourth quarter of this year.

"The next step would be a Phase IIb study, in the third quarter of 2005" with the subcutaneous formulation, which will be the version developed from this point forward. PDL didn't switch from IV to subcutaneous, Goff said, explaining that the more convenient formulation only recently became available.

"I'm sure the concept all along was to go with that formulation," he said.

Zenapax's success rate has been less than consistent. The humanized antibody failed in Phase II trials for ulcerative colitis in May and two years ago failed as a maintenance therapy in psoriasis. (See BioWorld Today, May 18, 2004, and March 22, 2002.)

But PDL plans to exercise the option with Roche, Goff said.

"We control the destiny [of the drug]," he said. "The current intention is to exercise that option and to see Zenapax come back to PDL in transplantation." Upon regaining the rights, PDL would re-launch the drug in 2007, Goff said, noting that Roche also has a "put" feature in the agreement that allows the firm to return Zenapax sooner than 2006.

Zenapax would be PDL's first fully owned product on the market. The other is likely to be Nuvion (visilizumab). At the meeting of the International Organization of Inflammatory Bowel Disease in March, PDL reported a strong signal of activity in both doses tested in a 32-patient Phase I trial of Nuvion (visilizumab) in patients with severe ulcerative colitis. A re-treatment arm of the study was stopped because of safety concerns but re-started in August.

"We anticipate having discussions with the FDA in the fourth quarter of this year with regard to what our pivotal studies would look like," Goff said. Those trials would start next year.

"Nuvion is what investors and analysts are focused on," he said, adding that the drug Severe, for steroid-refractory ulcerative colitis "could be on the market in the 2007 time frame as well."

PDL also pulls in royalties from sales of such strong-selling drugs as South San Francisco-based Genentech Inc.'s Avastin (bevacizumab) for colorectal cancer and Herceptin (trastuzumab), as well as Gaithersburg, Md.-based MedImmune Inc.'s Synagis (palivizumab) for pediatric respiratory infections.

Still, PDL posted a net loss in the second quarter of $12.4 million on $24.7 million in revenues. The company is making money while it can; the patents covering its humanized antibodies that allow for the royalty collections are called the "Queen, et al." set and they expire in 2013, PDL noted in its annual report.

"We don't envision that PDL will dry up and blow away" as a result of the expiration, Goff said.

As recently as last year, the patents were in dispute. PDL agreed at the end of 2003 to avoid a legal skirmish with Genentech over the latter's Xolair (omalizumab) for asthma, Raptiva (efalizumab) for psoriasis, and Avastin. Genentech in August had said it believed the 1988 deal with PDL did not require a license for Xolair. Investors, worried that royalties from other products might be at risk, punished PDL's stock by 25 percent.

Specifics of the settlement were not disclosed but involved reductions in royalty rates for high levels of annual sales of the antibodies. (See BioWorld Today, Aug. 18, 2003, and Dec. 2, 2003.)

At the bowel meeting, PDL also reported on another drug, HuZAF (fontolizumab), which did not meet the primary endpoint at day 28 in two Phase II trials (HARMONY I and HARMONY II) in Crohn's disease after one intravenous dose, PDL said, noting HuZAF did show statistically greater activity compared to placebo at several points after a second intravenous dose in the trial of 133 evaluable patients.

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