By Matthew Willett

Aradigm Corp. and Genentech Inc. decided to discontinue development of rhDNase using Aradigm's AERx System, citing commercial considerations, but said they are beginning a feasibility study of the use of AERx in other applications.

Aradigm CEO Richard Thompson said the decision on Genentech's part was one of priority, not dissatisfaction.

"The only information we have from Genentech is that this is a decision made based on a review of their portfolio and an assessment of rhDNase among their strategic alternatives, and that this is an area they chose not to invest in," Thompson said in a conference call. "They made it clear that it's not a technology issue. In fact, their scientists want more access to the technology as evidenced by the feasibility access agreement."

Genentech spokeswoman Wendy Emanuel said time and cost made the project less important for the company.

"We had a timeline and development cost estimate as we do with all our projects, and the timeline and development costs made the Aradigm project less competitive compared to our other projects at Genentech," Emanuel said. "As a result, we mutually agreed to discontinue the development and entered into a new agreement with Aradigm to allow Genentech to evaluate the feasibility of other projects."

The companies entered a development collaboration in May 1999 for Hayward, Calif.-based Aradigm to develop a pulmonary delivery system for Pulmozyme. (See BioWorld Today, May 27, 1999.)

Aradigm completed Phase IIa studies using AERx technology to deliver South San Francisco-based Genentech's cystic fibrosis drug, Pulmozyme. (See BioWorld Today, May 27, 1999.)

Pulmozyme, Genentech's cystic fibrosis drug, was approved in 1993 and its label has been broadened a few times since. The drug is designed to cut up and through thickened mucous secretions produced by the inherited lung disorder.

Aradigm has collaborations with several companies, including a $40 million deal with SmithKline Beecham plc (now GlaxoSmithKline) to develop an inhaled delivery vehicle for morphine. In September, Aradigm initiated a Phase IIb clinical trial of AERx using opioid analgesics. The multicenter trial involves self-administered morphine via inhalation through the AERx system. The trial is designed to evaluate safety, pain relief, time to pain relief and quality of life. (See BioWorld Today, May 27, 1999; Oct. 2, 1997; and April 6, 2000.)

But SmithKline Beecham in December pulled back some from the inhalable morphine collaboration, giving development control to Aradigm. Though the program is ongoing, how it will be funded remains undetermined. (See BioWorld Today, Dec. 18, 2000.)

In another collaboration, Aradigm has a $50 million deal with Novo Nordisk A/S, of Bagsvaerd, Denmark, to develop an inhaled delivery method for insulin. The product would not only provide a method for diabetics to avoid injecting themselves, but also would offer better blood sugar control because inhaled insulin is faster acting than injected insulin. (See BioWorld Today, June 4, 1998.)

Aradigm said Monday that its six remaining partner-funded collaborations would not be affected by the discontinuance of the Genentech collaboration.

"We're disappointed that this program is not going forward, but it should not have a long-term impact on the development of other products or the financial position of the company," Richardson said. "While we're disappointed this isn't moving ahead we're staying focused on our other programs."

In fact, he said, the forgiveness of a development cost loan from Genentech will be reflected as a small revenue for the company. And, he added, the feasibility study could yield another collaboration.

"We're looking forward to additional collaborations with Genentech that could result from our broad-based feasibility program. Collectively, our feasibility collaborations represent a broad pipeline," he said.

Aradigm's shares (NASDAQ:ARDM) lost 25 percent of their value Monday, dropping $3.188 to close at $9.75. Genentech's stock (NYSE:DNA) fell $1 to close at $60.90.