West Coast Editor

Talk about a turnaround.

Almost exactly a year ago, when Micrologix Biotech Inc. missed its primary endpoint with MBI-226, its product for catheter-related infections, partner Fujisawa Healthcare Inc. backed out of their collaboration and licensing deal.

Now, Micrologix has sealed another deal - this one worth up to C$42 million (US$31.5 million) with Strata Pharmaceuticals Inc. for development and marketing of the same product, which has finished one Phase III trial and is gearing up to enter a second, confirmatory study.

"We have a clear path forward," said James DeMesa, president and CEO of Vancouver, British Columbia-based Micrologix, whose stock (TSX:MBI) closed Tuesday at C91 cents, down C6 cents.

MBI-226 is a topical cationic antimicrobial peptide gel. Under the terms of the agreement, San Diego-based Strata gets exclusive rights to market the treatment in North America and Europe, providing Micrologix in return with $1.5 million up front, plus an equity investment of $500,000 in shares of Micrologix at C$1.08 per share, as well as milestone payments up to $30 million and double-digit royalties on sales.

Strata is taking on all clinical, regulatory, and commercialization costs for MBI-226 (omiganan pentahydrochloride), along with responsibility for manufacturing the gel, which is expected to enter the second Phase III study in the first half of next year.

Meanwhile, Micrologix and Strata are forming a joint development management committee, and Strata will seek a special protocol assessment from the FDA for the second Phase III study while the committee considers the option to submit a new drug application based solely on data from the first Phase III.

That trial, completed in July 2003, enrolled more than 1,400 patients at 29 centers in the U.S., with a primary endpoint of reduction in catheter-related bloodstream infections, or CRBSIs. MBI-226 yielded a 15 percent improvement as compared to the accepted standard of care, povidone-iodine, but those results were not statistically significant. Micrologix's stock lost 63 percent of its value on the news. (See BioWorld Today, July 24, 2003.)

But secondary endpoints of the study - which DeMesa said are widely recognized prerequisites to CRBSIs - were reduction of catheter colonization and local catheter site infections, and those achieved a high level of statistical significance compared to the standard of care (p=0.002 and p=0.004, respectively).

In June, Micrologix met for the second time with the FDA regarding how to move MBI-226, which has fast-track designation, forward. Among the options is basing an NDA on the confirmatory, second Phase III trial designed with a primary endpoint based on the statistically significant data gleaned from the first Phase III study. The possibly trickier path would be to submit an NDA for CRBSIs based on those statistically significant, secondary-endpoints data from the first Phase III study.

"If it were me, I would do both," DeMesa told BioWorld Today, noting that the decision must be made by the committee - and making that decision is "top of the list" for Strata.

"By the time the decision is made on the NDA, the data from that second Phase III trial would be available," he added. "Completing the second Phase III trial and then submitting the NDA is relatively low risk. The other [option] is a home run that would be great if we get it."

Colonization of germs at the catheter - one of the secondary endpoints in the first trial - is a biological sign that the FDA is "convinced is a worthwhile marker" for CRBSIs, DeMesa said, but "it's just not a validated model" since inadequate research has been done to establish it as such. And FDA standards are rigid.

"For regulatory authorities, it's pretty much black or white," DeMesa said.

The FDA made clear that submitting the NDA based on the secondary endpoints is "definitely the more aggressive path forward, and they encouraged us to do another trial," he said.

Also in June, Micrologix entered a 60-day, exclusive negotiation period with Strata, though the company's name was not disclosed then. Micrologix got a non-refundable fee for suspending licensing talks with other parties during the period, though further terms were not disclosed.

DeMesa described the fee as "six-figure" and said Strata soon became the most interesting potential partner.

"They've got a focus in hospital products and infectious diseases," he said.

The deal also puts Micrologix in a better position to advance MBI-3253, which is entering Phase II development for hepatitis C virus infections and which DeMesa characterized as a potential blockbuster. In the pipeline, too, is MITO-4509 for Alzheimer's disease, which is starting Phase II.

In the works is Micrologix's buyout of MitoKor Inc., of San Diego, for about 5.5 million common shares. The transaction, disclosed in April, also would include the payment of 4 million Series E preferred shares - worth about $4 million - to MitoKor for potential milestone payments.

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