BioWorld International Correspondent

Swedish drug discovery firm Karo Bio AB suffered its second setback with a major pharmaceutical partner in three months, as Abbott Laboratories decided to withdraw from their alliance to find glucocorticoid receptor antagonists for treatment of Type II diabetes.

In a separate move, the company said Tuesday it would shut down its site in Durham, N.C., which it gained as part of its acquisition of Novalon Pharmaceutical Corp. in 2000. Also, it said it would bring all of its research activity back to Sweden. The Huddinge-based company is cutting 26 jobs, but Chief Financial Officer Bertil Jungmar declined to outline the cost savings involved, citing the company's policy of not disclosing financial forecasts.

"We're closing the site," he told BioWorld International. "We're keeping the entity and we're keeping some activity into 2004." The restructuring is the company's second this year, following a previous round of redundancies disclosed in late January. When completed, it will have 100 employees. (See BioWorld International, Feb. 5, 2003.)

The Abbott withdrawal follows news from August that Merck & Co. Inc., of Whitehouse Station, N.J., decided to discontinue development of the lead compound in a discovery program focused on finding modulators of estrogen receptors for a range of indications. Merck continues to participate in that program, but Abbott, of Abbott Park, Ill., has handed back to Karo Bio all rights to the diabetes program. (See BioWorld International, Aug. 20, 2003.)

Karo Bio will finalize its plans for the program going forward following a board meeting in mid-December, President and CEO Björn Nilsson told BioWorld International, but the route it is most likely to take would involve pursuing additional preclinical and early clinical development of the lead compound, A-348441, on a solo basis.

"We are really prioritizing this very highly because we see this as potentially a major opportunity," Nilsson said. "We are confident we can find funding to put this into man ourselves," he said. The company also has received overtures from potential partners, but obtaining human data in advance of any negotiations would maximize the value of the program, he said.

Karo Bio bills A-348441 as a first-in-class compound for Type II diabetes, as it selectively inhibits the glucorticoid receptor in the liver, thereby reducing levels of gluconeogenesis, the process by which the liver secretes glucose to maintain optimum blood sugar levels in healthy individuals. Karo Bio and Abbott have already obtained evidence that A-348441 downregulates hepatic glucose production in three different animal species - mice, rats and dogs - without causing the lethal effects associated with the total elimination of glucose from the bloodstream. "If you are able to do that in man, insulin sensitivity will go up, and the pressure on the beta cells in the pancreas will go down," Nilsson said.

Additional toxicity data is required before Karo Bio can file an investigational new drug application, he said, but he expects the company to be in a position to do so in a matter of months. It then wants to move into the clinic as quickly as possible.

"I'm really looking forward to seeing this compound in man," Nilsson said.

Karo Bio reported SEK234.6 million (US$30.8 million) in cash, equivalents and short-term investments as of Sept. 30. Its shares dropped by more than 10 percent to close at SEK37.9 on the Stockholm Stock Exchange Thursday, when the Abbott news broke.

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