By Aaron Lorenzo

Aradigm Corp. and Novo Nordisk A/S are breathing easier after completing Phase IIb trials for AERx insulin Diabetes Management System (iDMS), their pulmonary insulin delivery system.

¿Novo has concluded that this is a product that is safe and effective, and it can go into Phase III,¿ said Rick Thompson, Aradigm¿s chairman, president and CEO. ¿They¿re happy with the safety results they¿ve seen, [and] they¿re happy with the efficacy results they¿re seeing.¿

At the same time, Aradigm reported the potential for an additional share investment from Novo of up to $25 million. Late last month, Novo made a $20 million investment in Aradigm, an investment that made Novo the largest stockholder of Aradigm with nearly 23 percent of the company. (See BioWorld Today, Oct. 26, 2001.)

¿It¿s an extremely positive relationship,¿ Thompson said. ¿This a very important program to Novo, and certainly a very important program to Aradigm. We¿re very well aligned culturally as well as with the goals we¿ve set for ourselves, and both parties are working closely and very hard on getting this product to market.¿

The two companies entered a potential $50 million deal in 1998 to develop the inhalable AERx iDMS. Hayward, Calif.-based Aradigm has the right, not the obligation, to sell to Novo the additional $25 million of common stock, subject to certain conditions. No shares are being sold to Novo, of Copenhagen, Denmark, at this point.

¿That¿s basically a financing vehicle for Aradigm that allows us to have some financial security without actually today having to make a sale of the stock,¿ Thompson said. ¿We¿ve got a very positive future here. We think our stock price may reflect that in the coming months and, as we decide to, we can use this new investment vehicle with Novo at higher prices.¿

The agreement limits the purchase per quarter to a maximum of $10 million, starting in the first quarter of 2002. Each purchase will be based on market prices prevailing around the time of each transaction. Novo then will hold the shares to be purchased under the agreement for at least two years from the effective date of each purchase, subject to certain conditions.

The additional money will be added to Aradigm¿s coffers, with its cash position currently listed at $41 million, Thompson said.

¿Our responsibility is to provide [Novo] manufacturing capability,¿ he said. ¿We have already completed building our commercial-scale manufacturing plant. We still have to install all of the manufacturing equipment and complete all the validation of that equipment, and that¿s going to be our largest use of cash over the next couple of years.¿

As part of the deal struck last month, Novo will take on a portion of manufacturing costs as well.

¿Even higher volume manufacturing capacity will be built by Novo Nordisk at their expense,¿ Thompson said. ¿That removed a very large burden from Aradigm for additional capital being required. In these several moves now, not only do we get more money from Novo, but also we¿ve reduced the long-term capital requirement at Aradigm, and now have the potential for raising another large amount from Novo. So, a large part of our financial security has been taken care of in these couple of moves.¿

With financial worries set aside, Phase III plans are under way for further development of AERx iDMS.

¿We are expecting an early 2002 start to a Phase III program,¿ Thompson said. ¿The first of the Phase III studies will be a long-term safety and efficacy study. It will have a couple of hundred patients and will be a two-year exposure. Additional shorter-term Phase III studies will commence after that.¿

The company will move forward with the next phase after the Phase IIb results are discussed with the FDA at an upcoming meeting. Those results showed the AERx iDMS to be at least as effective as intensified, subcutaneous injections of insulin. The 12-week trial, which involved almost 100 patients, was designed to investigate the safety and efficacy of pulmonary insulin by way of AERx iDMS compared to intensified treatment with subcutaneous insulin in people with Type II diabetes.

¿In this trial, this is the first time that anybody has taken pulmonary insulin, which is a fairly intensive treatment, and compared it to intensive injection treatment,¿ Thompson said. ¿What other companies have done is they¿ve taken their pulmonary product in an intensive therapy, and compared it to a less intensive subcutaneous therapy. So that what they¿re really seeing is two effects. You¿re seeing an effect from being more intensive and you¿re seeing an effect from pulmonary vs. injection, and you can¿t pull those apart. In our system, we¿re doing the most intensive injection therapy compared to pulmonary therapy, so we¿re comparing ourselves to the highest standards of care that¿s given today. And we still came out very favorably.¿

Detailed study results will be presented at scientific conferences during 2002.

¿I think it¿s an important message that both safety and efficacy are considered to be acceptable,¿ Thompson said. ¿There have been safety concerns raised about pulmonary insulin, but we¿re not seeing those concerns in our studies.¿

Aradigm¿s stock (NASDAQ:ARDM) gained $1.12 Tuesday, or 26.7 percent, to close at $5.32.