By Lisa Seachrist

Washington Editor

Xoma Ltd. has granted Baxter Healthcare Corp. worldwide rights to Neuprex (rBPI21) for treatment of meningococcemia and all future antibacterial and anti-endotoxin indications.

Under the terms of the agreement, Baxter's Hyland Immuno division will acquire the rights to the drug for the treatment of meningococcemia. Berkeley, Calif.-based Xoma will receive a $35 million aggregate in an up-front and milestone payment related to the meningococcemia indication. The breakdown was not disclosed.

Xoma would receive additional payments for additional indications and Baxter will pay for all future clinical development costs and royalties on product sales.

"Baxter is really a terrific partner for us," said Ellen Martin, Xoma's director of corporate communications. "They have an aggressive sales force in the critical care and emergency hospital market."

Xoma has been preparing to file a biologics license application (BLA) for Neuprex as a treatment for meningococcemia, a serious and debilitating infection with a gram-negative species of bacteria that also causes meningitis. The company completed a Phase III study of Neuprex in nearly 400 patients in the U.S. and UK. Xoma is scheduled to meet with the FDA to discuss the adequacy of the data.

"We are planning to file as soon as possible after the meeting with FDA," Martin said. "Baxter closed the deal before the meeting with FDA was scheduled. They've also committed to developing Neuprex in an additional indication."

While Martin wouldn't disclose the royalty rate Xoma will receive for sales on Neuprex once it's approved, she did say the rate reflected the late stage of development of the product. Royalties on late-stage products typically range between 20 percent and 50 percent of sales.

Outbreaks for meningococcemia have increased in recent years. The disease has a very rapid onset of life-threatening symptoms with high mortality. Survivors often suffer from gangrene followed by amputation and/or central nervous system damage.

The bacteria responsible for meningococcemia are generally controlled by first-line antibiotics; there is no treatment for the inflammatory cascade triggered by gram-negative bacterial endotoxin. That cascade can lead to organ failure, shock and death.

Neuprex is derived from the bactericidal/permeability-increasing protein found in white blood cells. The drug works by punching holes in the outer shell of bacteria and killing them. When it binds to endotoxin, it neutralizes its biologic activity as well as accelerating its clearance from the bloodstream.

Baxter hasn't decided the additional indication for Neuprex; however, possibilities include cystic fibrosis, inflammatory bowel disease and burns.

In September, Xoma announced it had stopped a Phase III study of Neuprex in hemorrhagic trauma due to "futility." The company is continuing to analyze the data in order to determine why the trial failed and whether the drug is likely to have any utility for the treatment of complications of trauma.

Xoma's stock (NASDAQ:XOMA) closed Tuesday at $7.125, up $1.50, or 27 percent.