National Editor

Gearing up for an approval of the psoriasis drug Raptiva by year's end, Genentech Inc. and XOMA Ltd. have retooled their agreement, with the former financing the latter's development costs $80 million at a time.

"There's been some misperception that Genentech is handing over $95 million in loans," said Laura Zobkiw, corporate communications manager for Berkeley, Calif.-based XOMA, but the deal has not been altered by much.

"Basically, the credit limit from the original agreement has been increased, and there's a new commercial loan," she said. "This is mainly housekeeping to address and reflect current circumstances."

The original agreement called for a loan facility of $60 million, but that was arranged in 1999, she noted.

"Every few years you need to do this," Zobkiw said, and XOMA did not request the changes because of its financial circumstances or any pressing need.

"Our cash flow is very good," she added.

The company ended last year with $38.2 million in cash and estimated that amount, along with funding available to it under its collaborations, was enough to meet operational needs through at least the end of 2004. XOMA has deals with Baxter Healthcare Corp., of Deerfield, Ill.; Millennium Pharmaceuticals Inc., of Cambridge, Mass.; and Onyx Pharmaceuticals Inc., of Richmond, Calif., although current activities with the last have been suspended.

Under the terms of the loan agreement with Genentech, XOMA may repay the loan in cash, equity or through deferral of up to $40 million as an offset against proceeds from its 25 percent profit share in Raptiva (efalizumab), for which the biologics license application was submitted late last year, bolstered by strong Phase III data. XOMA can take 90 days after Raptiva's approval to decide which repayment plan it prefers. (See BioWorld Today, Dec. 27, 2002, and Sept. 18, 2002.)

That Phase III trial, the third conducted with Raptiva (formerly called Xanelim), was in 556 patients with moderate to severe plaque psoriasis and was included in the BLA package.

The new portion of the loan agreement is a $15 million loan facility from Genentech to fund XOMA's share of U.S. marketing and sales costs. That loan, too, is to be repaid in cash within 90 days after FDA approval of Raptiva, unless earlier repayment is otherwise triggered. XOMA is granting South San Francisco-based Genentech a security interest in XOMA's profit share as collateral against any unpaid past-due portions of the loans.

There also are "provisions related to the handling of new indications" for Raptiva in the tweaked agreement, but nothing that changes the deal hugely, Zobkiw told BioWorld Today.

"It's just made a lot clearer," she said.

Raptiva is a humanized monoclonal antibody and targeted T-cell modulator, designed to inhibit the inflammatory cascade in psoriasis. Specifically, it works by blocking the binding of LFA-1 to ICAM-1, inhibiting T cells from binding to key cells in the psoriasis cascade, rather than depleting T cells themselves.

If approved, Raptiva would be facing off - in a market that has been estimated at 150,000 patients in the U.S. on systemic therapies for psoriasis - against the recently approved Amevive (alefacept), from Biogen Inc., of Cambridge, Mass., and Amgen Inc.'s Enbrel (etanercept), already approved for psoriatic arthritis and used off-label for psoriasis. (See BioWorld Today, Feb. 3, 2003, and Sept. 16, 2002.)

XOMA's stock (NASDAQ:XOMA) closed Friday at $4.18, up 26 cents. Genentech's shares (NYSE:DNA) gained 1 cent to close at $35.