By Randall Osborne

Four months after Cell Therapeutics Inc. disclosed negative results from a Phase III trial with lisofylline for bone-marrow transplant patients, Johnson & Johnson (J&J) said it is backing away from — but not abandoning — their development deal.

"They're hanging on," said James Bianco, president and CEO of Seattle-based CTI.

Under terms of the restructured deal, CTI will take back development of lisofylline, with J&J paying its agreed share of costs through the end of this year. After that, J&J has an option to resume paying to push the drug forward.

In March, CTI reported preliminary data from the Phase III study in bone-marrow transplants, which failed to meet the primary endpoints: reductions in neutropenia-related infections and in mortality associated with the transplants. (See BioWorld Today, March 26, 1998, p. 1.)

On positive data, CTI would have filed a new drug application with the FDA this year, and the deal with J&J was structured according to that plan, Bianco said.

"The license agreement is still operative," he said. "This allows [J&J] to defer certain obligations tied to a regulatory event."

Lisofylline is an anti-inflammatory compound administered after chemotherapy or radiation treatments that precede bone marrow transplants for patients with hematological malignancies.

Another Phase III trial for bone-marrow transplants, using a higher dose, will finish enrollment of its 154 patients in the first quarter of next year, with data expected early in the summer.

An independent data and safety monitoring board has reviewed data in the first 100 patients "to make sure there were no imbalances," Bianco said.

The first bone-marrow study was marred by four of 17 centers using unusually high levels of radiation and chemotherapy on particularly sick patients, he said.

"We know the study that's currently ongoing won't have that issue," Bianco added.

Two more Phase III trials with lisofylline are ongoing: one 160-patient study in acute myelogenous leukemia (AML), which will complete enrollment by the end of this year and yield data early in the second quarter of next year; and one in acute lung injury, sponsored by the National Heart, Lung and Blood Institute, which is due for an interim analysis of data in the first quarter of next year.

"The cost to us of [J&J] not participating in 1999 is less than a million dollars," Bianco said, since most of the work will be done by then.

CTI began the collaboration in 1996 with two J&J subsidiaries: The R.W. Johnson Pharmaceutical Research Institute, of San Diego, and Ortho Biotech Inc., of Raritan, N.J. The deal included a $5 million up-front payment to CTI and the sale of $5 million in CTI stock to J&J. (See BioWorld Today, Nov. 12, 1996, p. 1.)

Under the original terms, J&J was to pay 60 percent of U.S. development costs for lisofylline for bone marrow transplants. In 1997, the AML indication was added to the deal, on the same terms. The first regulatory filing was expected late this year, after which J&J would begin developing the drug in Europe.

"[J&J] is kind of on a vacation period, waiting to see the results," Bianco told BioWorld Today. If results are positive, J&J will turn on the money spigot again. "They agreed to make additional payments [not specified in the original deal] that will more than make us whole," he said.

J&J's decision to wait "puts us in a fine position," Bianco added. "They clearly have walked away from other collaborations. They walked away from Amylin [Pharmaceuticals Inc., of San Diego]. They walked away from Alliance [Pharmaceutical Corp., of San Diego]. Maybe three's the charm."

In May, J&J gave development rights to Oxygent, an intravascular oxygen carrier, back to Alliance. In March, J&J pulled out of a pact for pramlintide for diabetes with Amylin.

CTI's stock (NASDAQ:CTIC) closed Thursday at $2.50, up $0.25. *