BioWorld International Correspondents

SYDNEY, Australia - Unfavorable results from clinical trials have stopped another collaborative project involving an Australian biotech company, despite favorable preclinical trials. BresaGen Ltd. and British Biotech plc abandoned a collaborative agreement to develop E21R as a treatment for acute myeloid leukemia (AML).

British Biotech, of Slough, UK, had stopped a Phase II clinical study of the compound in AML earlier this month.

"The decision to end the collaboration follows further review of new preclinical study data that fail to confirm BresaGen and British Biotech's assessment of commercial prospects implied by earlier published data on E21R-induced apoptosis in acute myeloid leukemia cells," BresaGen said.

All rights to the compound have reverted to Melbourne-based BresaGen, which said on Monday that it was restructuring to conserve cash, moves that should leave it with funding for 18 months.

BresaGen's president and CEO, John Smeaton, said that two clinical trials involving E21R for chronic myelomoncytic leukemia and rheumatoid arthritis were on hold while the company reviewed the available data. The Hanson Centre for Cancer Research of the Institute of Medical and Veterinary Science in Adelaide, where the compound was originally discovered, would be asked to repeat some preclinical trials.

Smeaton said that E21R might also have an effect in some very rare forms of cancer, but those cancers were too rare to justify development of a commercial drug.

For British Biotech, the termination of the licensing agreement, after an independent clinical study failed to replicate published preclinical data showing the compound induced apoptosis in leukemic cells, marked another setback.

British Biotech's share price fell by 25 pence to 6.75 pence on the week, giving the company a market capitalization of £45 million (US$70.6 million), less than its cash reserves, which stood at £50.4 million in April. Since the beginning of 2002, the stock has floated down from 17.75 pence.

When British Biotech announced on July 5 that, as a result of the new preclinical findings, it was stopping its Phase II study of E21R in acute myeloid leukemia, it said the data had no implications for E21R in chronic myelomonocytic leukemia (CMML) or juvenile myelomonocytic leukemia (JMML). E21R was granted European orphan drug status in JMML in March.

But last week the company said external experts had advised that a planned Phase I study in children with various myeloid leukemias, a prerequisite for studies in JMML, could not proceed on ethical grounds. As a result, British Biotech is terminating the agreement of December 2000, under which it took full rights to commercialize E21R for all indications.

BresaGen said it has placed patient accrual on hold in two clinical studies in CMML and rheumatoid arthritis. It is now in talks with the Hanson Centre for Cancer Research and the Institute of Medical and Veterinary Science in Adelaide, where E21R was discovered. It wants to review the data on E21R, a modified form of the cytokine GM-CSF, and discuss further the possible repetition of some of the preclinical studies.

British Biotech had made a US$1 million equity investment in BresaGen and agreed to make up-front and milestone payments totaling $7 million up to approval when the deal was signed.

This is the second collaboration to be halted by British Biotech this year. In April a trial of stents coated with the British Biotech compound Batimastat, being carried out by Biocompatibles plc, was suspended. Another of British Biotech's of three remaining compounds in clinical trials, the cancer treatment MG98, has run into problems. Recruitment to two North American Phase II trials was halted recently by British Biotech's partner, MethylGene Inc., after patients failed to show an objective clinical response.

All of this undermines British Biotech's strategy of using its cash pile to license in products for development. Meanwhile, the company has so far failed to announce a partner for its preclinical antibiotics program.

BresaGen, meanwhile, also owns four of the stem cell lines eligible for U.S. government funding. Those lines, recently the subject of a US$1.6 million grant, are being developed at operations in Athens, Ga.