By Randall Osborne

A year after withdrawing its anti-obesity drug, Redux (dexfenfluramine), from the market, Interneuron Pharmaceuticals Inc. has reached an agreement in principle to pay $70 million as a settlement of claims by users of the product.

"The issue had become more economic than scientific," said William Boni, spokesman for Lexington, Mass.-based Interneuron. "We simply couldn't maintain the demands of Redux litigation over a long period of time."

Most of the money — $55 million — would come from royalties on Interneuron sales over a seven-year period from the date the settlement is finalized. The company has three products in Phase III trials: Bextra (bucindolol HCI) a vasodilating non-selective beta blocker for heart attack; CerAxon (citicoline sodium) for ischemic stroke; and pagaclone, a partial agonist at a modulatory site on the gamma amino butyric acid receptor, for panic and anxiety attacks.

If royalty payments amount to less than $55 million at the end of the seven-year period, then the company will provide shares of stock in an amount equal to the unpaid balance divided by about $7.50 per share.

"That was a formula arrived at by the attorneys — an average of closing prices," Boni said.

He told BioWorld Today that Bextra likely will be the first of the Phase III drugs to win approval, perhaps in mid-1999. The trial is conducted under early-stopping rules, whereby a monitoring committee can stop the study when it reaches statistical significance. CerAxon probably will be approved after Bextra, and pagaclone after that, Boni said.

The remaining $15 million of the $70 million would be paid in three installments: the first, of $2 million, within 10 days from last Friday; a second, of $3 million, to be made within 10 days after the settlement agreement is approved by the court; and the third, of $10 million plus interest, to be made within 10 days after the settlement becomes final.

Boni estimated the second installment would come during fiscal 1999 — that is, between Oct. 1, 1998, and Sept. 30, 1999. The third installment, he estimated, would be made in fiscal 2000.

The $55 million in payments would not begin until after the final $10 million installment, so the larger portion of the payout would be distributed "over the next nine years, essentially," Boni said. "That makes it very realistic. What's really important is the time period over which the payments are spread."

Under the terms of the settlement, a limited fund class action would be certified, and class members would be required to seek compensation only from the fund. Their lawsuits against Ridgefield, Conn.-based Boehringer Ingelheim Pharmaceuticals Inc. (which encapsulated and packaged Redux) would be dismissed.

Interneuron was insured for Redux, and about $30 million in insurance proceeds also would be shoveled into the fund, Boni said.

Interneuron and Wyeth-Ayerst Laboratories, of King of Prussia, Pa., withdrew Redux in September 1997, after the FDA determined about 30 percent of patients using Redux — most often in combination with phentermine, a diet drug — suffered aortic regurgitation or mitral valve abnormalities. Wyeth-Ayerst is a subsidiary of Madison, N.J.-based American Home Products. (See BioWorld Today, Sept. 16, 1997, p. 1.)

CerAxon failed in a Phase III trial in April, when an analysis of preliminary data showed the drug failed to meet its primary and principal secondary endpoints. The drug produced no difference in reduction of infarct size vs. placebo, and no improvement was shown in treated patients compared with those on placebo. (See BioWorld Today, April 21, 1998, p. 1.)

In the new trial, begun in July, Interneuron is enrolling 900 patients, compared with the earlier 100 patients, and dosage has been increased.

As of June 30, Interneuron had $80.5 million in cash, and recorded a net loss of $14.7 million for the third quarter. The company's stock (NASDAQ:IPIC) closed Friday at $3.187, up $0.50. *