NeoPharm Inc. on Tuesday attempted to clarify a published report that quoted a Pharmacia Corp. spokesman as saying one of the products subject to their collaboration “failed to show benefit.”

NeoPharm on Friday said it had filed for arbitration against Pharmacia regarding their 1999 license agreement, and then on Monday a Pharmacia spokesman reportedly said, “LEP failed to show a benefit in studies Pharmacia conducted.”

LEP, or NeoPharm’s liposome encapsulated paclitaxel, is the subject of NeoPharm’s dispute with Pharmacia. The companies entered the agreement in February 1999 in a deal that was projected to mean up to $77 million for NeoPharm, including $17 million up front, for LEP and liposome encapsulated doxorubicin (LED). (See BioWorld Today, Feb. 23, 1999.)

NeoPharm, of Lake Forest, Ill., said Tuesday that the reason LEP had shown “suboptimal performance” was that “the formulation used by Pharmacia in Phase II clinical trials is not the LEP formulation used by NeoPharm in its own Phase I clinical trials, nor is it the LEP formulation NeoPharm licensed to Pharmacia.”

“Pharmacia has delayed the development of LED and LEP, and as a result our shareholders have been damaged,” NeoPharm Chief Financial Officer Larry Kenyon told BioWorld Today. “If LEP and LED were on schedule, we would be a lot closer to having a commercial product with the prospect of having royalties, milestones and co-promotion fees coming in to NeoPharm.”

The Pharmacia spokesman quoted Monday on Bloomberg.com said he had not seen NeoPharm’s release Tuesday and could not comment until he had.

NeoPharm’s stock (NASDAQ:NEOL) dropped $4.98 Monday, or 24.4 percent, to close at $15.43. The shares fell 44 cents Tuesday to close at $14.99.

Kenyon told BioWorld Today that at this point, the company is seeking only damages, as opposed to having the drug returned to NeoPharm.

NeoPharm, in announcing the arbitration action, said Friday “that Pharmacia failed in its duty under the license agreement to use reasonable efforts to develop LEP and LED. NeoPharm further contends that Pharmacia breached its duty to consult with NeoPharm on the progress of the drug development program, and thereby impaired NeoPharm’s ability to monitor the development. As a direct result of these failures by Pharmacia, NeoPharm asserts that it has sustained substantial damages.”

The release also said that under the license agreement, “Pharmacia agreed to accept full responsibility for the development of both LEP and LED.”

NeoPharm said it would be seeking “substantial” damages, “which include, but are not limited to, lost co-promotion and royalty revenues that would have been received if LEP and LED had not been delayed, and milestone payments that would have been received if the programs had been properly conducted by Pharmacia.”

NeoPharm also said it is not seeking during arbitration to have the license agreement terminated.