By Lisa Seachrist

Washington Editor

WASHINGTON - Cypress Bioscience Inc. hit a regulatory snag in its attempt to get the label for Prosorba column expanded to include the treatment of rheumatoid arthritis (RA), at the same time that the company disclosed it has signed a letter of intent for licensing and distribution with a German collaborator.

San Diego-based Cypress received notification from the FDA that its pre-market approval application was deficient, following a routine audit by the agency of clinical trial documentation. The company already has prepared its responses to the letter, and delivered them to the agency last Thursday.

"We were very disappointed and surprised with the FDA letter," said Jay Kranzler, CEO for Cypress. "The nature of the questions that the agency asked us are by definition serious, because they could affect the integrity of the data. However, the good news is that the answers were pretty straightforward. I'm optimistic and hopeful that this will all come together in a short time."

Despite the deficiency letter, Cypress has signed a letter of intent with Fresenius AG, of Bad Homburg, Germany, and its subsidiary, Fresenius Hemotechnology Inc., of Concord, Calif., for an exclusive license and distribution agreement. Fresenius is a leader in the dialysis equipment and services field.

Filtration May Not Be Only Benefit

Details of the deal have not been finalized, Kranzler said, but it encompasses all the elements Cypress was looking for in a partner, including co-investment, profit-sharing, an equity investment and cash payments.

"We expect to release all of the details once we have the definitive agreement in place," Kranzler said. "Fresenius is a very good partner for us, because they are leaders in both the product side and the service side of dialysis."

The Prosorba column was approved in 1987 as a device to treat idiopathic thrombocytopenic purpura (ITP), an immune-mediated bleeding disorder. The device is a disposable filter that uses immobilized protein A to bind and remove circulating immune clusters of antibodies and antigens, which are believed to be associated with autoimmune diseases such as RA.

However, Kranzler said, the company is not certain filtration is the sole mechanism of action for Prosorba, because some patients have had very long-term relief of symptoms as a result of treatment with the device.

The standard treatment tested in RA patients who've failed to respond to second-line or disease modifying anti-rheumatic drug (DMARDs) is 12 two-hour, weekly outpatient apheresis sessions. In a process similar to kidney dialysis, the patient's blood is passed through a machine that separates the blood cells from the plasma. The plasma is then passed through the Prosorba column, recombined with the blood cells from the plasma and returned to the patient.

Kranzler said the standard procedure uses machines designed for use in platelet donation. Because there is no need to separate the platelets when using the Prosorba system, Fresenius is considering development of a less-expensive method of filtering the blood through the Prosorba column.

The FDA granted Prosorba "special review" status in May. Kranzler said the agency now has about 180 days to decide the device's fate. "We are hoping that the goodwill we've built with the agency is going to lead to a rapid review," Kranzler said. "But that isn't up to us."

Cypress' stock (NASDAQ:CYPB) closed Monday at $2.968, down $0.718. n

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