By Lisa Seachrist

Washington Editor

WASHINGTON — As a result of corporate restructuring at Astra AB, Allelix Pharmaceuticals Inc. has regained all rights to its recombinant parathyroid hormone, ALX1-11, for the treatment of osteoporosis and has begun searching for another corporate partner to collaborate in the clinical development of the drug.

Astra's move ends a collaboration that began in June 1996, when Astra, of Sodertalje, Sweden, signed a deal with Allelix, of Mississauga, Ontario, while the latter was conducting Phase II trials of the drug in post-menopausal women with severe osteoporosis. With results of the trials in hand, Allelix already has leads for another collaboration to bring the drug to the market.

"In the short term, this is a setback, because we won't be able to begin Phase III trials by the end of this year," said Jerry Ormiston, manager of investor relations for Allelix. "But we've already had several pharmaceutical companies express interest in the project since our announcement in August that Astra was re-evaluating the project."

Bone, as a living tissue, is constantly in the process of tearing itself down and rebuilding. In the normal aging process, the balance between building bone and tearing it down slowly but inevitably shifts toward the breakdown of bone.

Older women, by virtue of the drastic drop in estrogen following menopause, have a one-in-four chance of suffering a broken bone caused by osteoporosis. For older men, the risk is one in eight.

Most current therapies focus on thwarting the work of osteoclasts, which are responsible for breakdown of bone. ALX1-11, on the other hand, boosts the activity of bone-building cells, called osteoblasts. Ormiston said ALX1-11 holds promise as a means to build bone quickly.

Allelix steered the drug through Phase I and Phase II studies. In September 1997, the company completed its Phase II trials and, based on the data, Astra committed to conducting Phase III studies. In November 1997, Allelix received a milestone payment of $C17.1 million (US$11.3 million).

In January, Astra said Phase III studies would begin by the end of this year. However, with Astra's decision to buy out Merck & Co. Inc.'s share of their joint venture, Astra Merck Inc., Astra decided to drop this osteoporosis project.

Allelix will receive all assets, data, knowhow and proprietary rights generated during Astra's involvement in the project, and Astra will absorb the costs of its participation over the last 2 years. (See BioWorld Today, June 22, 1998, p. 1.)

Astra will be presenting the data from its Phase II trial, which show a dose-related response to the drug, at a scientific meeting in December. Meanwhile, the company will be assessing the data generated by Astra and contacting researchers and regulatory agencies in an effort to design a Phase III study of the drug.

"We would not proceed with a Phase III study without a partner," Ormiston said. "But we are very confident in this product. The interest so far from pharmaceutical companies is very encouraging."

Allelix's stock (TSE:AXB) closed Friday at $3.70, up $0.50. *