By Mary Welch

Confident that FDA approval for its Prosorba column to treat rheumatoid arthritis (RA) is imminent, Cypress Bioscience Inc. signed a distribution deal potentially worth more than $60 million with Fresenius AG.

The agreement provides Fresenius, of Bad Homburg, Germany, and its U.S. subsidiary, Fresenius Hemotechnology Inc., of Concord, Calif., an exclusive license to distribute the Prosorba column for RA in the U.S., Europe and Latin America, as well as Japan and select Asian countries, subject to certain conditions.

Fresenius will purchase $1.5 million in Cypress equity up front, which represents less than 1 percent of the San Diego-based company. In addition, Cypress will get license payments of up to $54 million based on sales. The agreement calls for a 50-50 profit split in countries outside the U.S., and profit sharing of 50-50 in the U.S., until the Prosorba column reaches an undisclosed sales threshold. At that point, Cypress will receive 60 percent of the profits and Fresenius 40 percent.

¿What is also important about this deal is that Fresenius has extended a line of credit ¿ about $7 million ¿ to help expand our manufacturing plant in Redmond, Wash., and build up our inventory,¿ said Carl Bobkoski, Cypress¿ president and chief operating officer. ¿They also have the option to acquire the manufacturing facility. What this does is significantly reduce our burn rate over the next couple of years.¿

If Fresenius exercises the option to buy the plant, good until the end of 2000, the sale price of the assets would be offset by the line of credit.

PMA Rejected Despite Panel Recommendation

Cypress hit a regulatory snag in January, when the FDA told the company its pre-market approval application for Prosorba was deficient. The disapproval came after a 10-1 vote in October by the advisory committee on gastroenterology and urology devices, which recommended the extension of the Prosorba column¿s label to include treating RA for moderate to severe patients who have failed second-line or disease-modifying anti-rheumatic drugs, such as methotrexate. (See BioWorld Today, Jan. 26, 1999, p. 1, and Nov. 2, 1998, p. 1.)

¿We have responded to the letter, and are confident of getting approval on a timely basis,¿ Bobkoski said. ¿It wasn¿t a major problem. There were just some questions about a basic misunderstanding about what happened in the protocol, and in the field. It was totally routine stuff.¿

Bobkoski refused to speculate when he believed the FDA might rule but said that their ¿readiness plan¿ could have them launching by product by April 1.

The Prosorba column was approved in 1987 as a device to treat idiopathic thrombocytopenic purpura, an immune-mediated bleeding disorder. Last year, the company posted revenues of $2.6 million, of which only 2.4 percent came from the column.

The Prosorba column is a plastic cylinder that contains highly purified protein A, immobilized on an inert silica matrix. The protein A binds to and removes antibodies, including clusters of circulating immune complexes and antigens that contribute to the symptoms characteristic of RA.

The device has additional immunomodulatory effects, and the company is not certain filtration is the sole mechanism of action, because some patients have had very long-term relief of symptoms as a result of treatment.

The column is used in conjunction with an apheresis procedure, which is similar to kidney dialysis. In that procedure, blood is drawn from a vein and passed through an apheresis machine that separates the blood cells from the plasma. The plasma then passes through the Prosorba column, where antibodies are removed. Then, the plasma is recombined with the blood cells, and put into the patient via a vein in the other arm.

Pending FDA approval, Prosorba will be offered to the 3,900 practicing rheumatologists in the U.S., and will be used in hospitals, apheresis centers or community blood banks. A patient¿s course of therapy would consist of 12 once-a-week procedures. The course of therapy would cost about $20,000, about half of which is the cost of the column itself.

Pending FDA approval, the Prosorba column will be marketed to patients who failed the standard drugs.

¿Remember, this is a device, not a drug,¿ Bobkoski said. ¿This may also be chosen by people who want to be drug-free, for whatever reason. There are a variety of reasons for choosing the Prosorba column therapy.¿

Bobkoski estimates there are between 200,000 to 250,000 patients in the U.S. who fall into the moderate-to-severe category. ¿We¿ll be quite happy to capture 10 to 20 percent of that market over the next two to three years,¿ he said.

Cypress To Take Lead Role In U.S.

Cypress will take the lead role in ongoing research, and clinical and regulatory activities in the U.S., while assuming sales and marketing efforts in the U.S., with its sales force of 15.

Fresenius will serve as exclusive distributor, participate in U.S. co-marketing activities, and will lead international development and registration efforts.

¿[Fresenius] will do a fantastic job in Europe, getting the column through clinical trials and regulatory agencies,¿ Bobkoski said. ¿We think they¿ll generate greater sales and profit streams than if we had used independent distributors.¿

Fresenius will also design ¿Prosorba-friendly¿ instruments and disposables, and will adapt a therapeutic apheresis instrument already under development to simplify the process of Prosorba column therapy. The anticipated launch dates for the latter instrument is 1999 in Europe, and 2000 in the U.S.

Fresenius will also work with the Fresenius Medical Care AG (FMC), a majority-owned Fresenius company, to increase the availability of the Prosorba column.

FMC is a leading provider of dialysis services, with 770 dialysis sites in the U.S., and contracts with more than 500 hospitals to offer acute services, including apheresis treatments. FMC will expand its service capabilities to include the column, once it receives FDA approval.

Cypress Bioscience¿s stock (NASDAQ:CYPB) closed Monday at $3.187, unchanged. n