Transkaryotic Therapies Inc. and Wyeth Pharmaceuticals are parting ways over a Factor VIII gene therapy platform, giving TKT back European rights and allowing it to start looking for a worldwide partner.

Wyeth, of Madison, N.J., turned the European rights loose and paid TKT a $500,000 termination fee to get out of their arrangement. For TKT, shopping for a U.S. partner for the platform now is made easier by the ending of a deal that really wasn't making either side happy, said Michael Astrue, TKT's president and CEO.

"I know [Wyeth has] been terminating a lot of these second-generation programs and they've had some discussions with regulators about it," Astrue told BioWorld Today. "This was a little more mutual. I think the deal really wasn't working to either company's satisfaction. These days, big pharmas are looking for worldwide rights or they start to lose interest. From our end, they weren't committing enough to financially keep it moving the way we wanted."

Add those two elements together and it was enough for the parties to "cut the cord," he said.

Originally signed in 1993 with Genetics Institute Inc., a unit of American Home Products Corp., the deal involved European rights for Factor VIII gene therapy, while Transkaryotic retained rights elsewhere. With European rights now back in its deck, TKT has more to offer a potential new partner.

"We started talking to other companies about licensing U.S. rights, and as soon as they saw that Wyeth had European rights, there might be a long silence or they might look at their shoes," Astrue said, adding that although TKT has talked to a number of companies, discussions are early stage.

The hope is to get another partner on board - worldwide, this time - in the first half of 2004.

The Cambridge, Mass., company's nonviral ex vivo gene therapy system is designed to modify a patients' cells to produce and deliver proteins in the body. The 1999 death of Jesse Gelsinger, a viral vector gene therapy patient, might have "scared [researchers] away from gene therapy generally," Astrue said, but TKT's platform doesn't go the viral route.

The method involves taking skin from a patient, inserting a gene into it, waiting weeks and then reinserting the skin back into the patient. While that circumvents any issues with viral vectors, it also requires a product partner of some size and infrastructure - Astrue said he's received partnering interest from smaller biotech companies, but is aware his company needs something larger.

The lead for the gene therapy is the Factor VIII platform. The company finished a Phase I trial in 12 patients with severe hemophilia in 2002, and while Astrue called the hemophilia program "the proof of concept for the platform," he believes it can be used with DLP1 for diabetes and with erythropoietin. For now, though, the hemophilia program is on hold while TKT seeks a partner.

Replagal is TKT's marketed Fabry's disease product. While approved in Europe and certain areas - it generated $14.4 million in sales in the second quarter - an FDA panel unanimously voted against the drug's efficacy early this year. Industry observers for years had tracked the development of not only Replagal, but also of Cambridge, Mass.-based Genzyme Corp.'s Fabrazyme, as the companies raced for Fabry's disease approval and orphan drug exclusivity in the U.S. market. Following the negative panel meeting, TKT's woes grew as it received a copy of a formal order of investigation by the SEC related to Replagal (agalsidase-alfa). Class-action lawsuits followed and a subsidiary of Geneva-based Serono SA filed a suit alleging European patent infringement related to Replagal. The company cut loose 100 employees to drop its burn rate. Its shares dropped to $3.80 in February. (See BioWorld Today, Jan. 15, 2003, and March 20, 2003.)

Into this maelstrom stepped Astrue, accepting the board's appointment as the replacement for the departing Richard Selden, who resigned as president and CEO.

"The first couple months were very, very hard," Astrue said. "But I think we've got the right focus now and the right direction. You can see a big uptick in employee morale. Turnover is down. Internally, things are going very well. The burn [rate] is down. We are doing the right things about as fast as we can do them."

The company is "working on ways to get into the U.S. market" with Replagal, he said. It is looking at a Phase IV trial it did in Europe and examining ways to produce the same data in the States. However, Astrue said there "is no realistic chance" of the drug being sold in the U.S. before the end of next year.

Another TKT drug, Dynepo, is tied up in litigation. Amgen Inc., of Thousand Oaks, Calif., and TKT presented oral arguments two weeks ago in their patent infringement case regarding their epoetin products: Dynepo and Amgen's Epogen. The case in January was remanded to the U.S. District Court for Massachusetts from the U.S. Court of Appeals for the Federal Circuit. It appears it will be some time before the matter is resolved.

"It's very hard to know what's going to happen, when," Astrue said.

Up next for TKT is a pivotal trial in Hunter's syndrome, expected to start in September. Astrue said that product should drive substantial growth for the company, as he estimates the market potential to be about $300 million. However, the trial will require about $10 million and be "the most expensive we've ever done."

TKT posted a net loss for the second quarter of about $21 million, and it reported about $198 million in cash and marketable securities as of June 30. The second-quarter figures led at least one analyst to upgrade TKT.

TKT's stock (NASDAQ:TKTX) gained 20 cents Monday to close at $10.60.