Protein Design Lab Inc. said Sunday that it was delaying two late-stagetrials while it brings in new cell lines, and that Corange Ltd. intends togive up rights to certain preclinical projects that could have been worth$48 million in milestone payments.The Mountain View, Calif. company's stock (NASDAQ:PDLI) fell$4.56 (20 percent) Monday, from $22.56 to $18, in trading of 1.47million shares.Matthew Geller, a biotechnology analyst with Oppenheimer & Co. ofNew York, told BioWorld the stock move "was another one of theserapid drops where people misunderstand the news. People get nervousand lose sight of the fact that this a company with 14 products. Peopleare jumping to conclusions. If anything, this confirms Corange'scommitment to an antibody program with Protein Design Labs."Corange, with its head office in London, is the parent company ofBoehringer Mannheim Therapeutics, with which the Protein Designdeal is structured. Under an October 1993 agreement, Corange alreadyhas paid $30 million for 1.2 million shares of Protein Design, $10million in license fees, and $8 million in funded research. Corange iscommitted to another $22 million in research funding over two years,and to a $45 million equity investment in December, when the ProteinDesign stock likely will be bought for $36.50 per share as stipulated inthe original agreement. That would give Corange a 15 percent stake inProtein Design.Laurence Korn, Protein Design's president and CEO, told BioWorldthat Corange has not formally terminated its rights to the certainpreclinical products, but that Corange indicated in discussions onFriday it would do so. If Corange goes through with the termination,some $48 million of the deal's potential $91 million in milestoneswould be lost, he said.Carol Werther, a biotech analyst with Cowen & Co., told BioWorld therefocus by Corange was not a major issue, since it involved preclinicalcompounds. But the delay in the trials for the human anti-cytomegalovirus (CMV) and human anti-hepatitis B antibodies will setdevelopment back a year.Cary Queen, senior vice president and vice president, research forProtein Design, told BioWorld the cell lines being used were threeyears old, and developed by Sandoz Pharmaceutical Corp., which soldProtein Design the CMV and hepatitis B antibody rights. He saidProtein Design recently noticed that particulates had formed on theCMV antibody material while the material was in ampoules."The new cell lines will be four times more productive that the originalcell lines," Queen said, "and that will provide major advantages as faras making more antibodies and making it more inexpensively." He saidthe company just found out about the problem, and hasn't had time todevelop new timelines.But, Queen said, steps needed to get back into the clinic involvemanufacturing from new cell lines, which could take several months;secondly, Protein Design must show the new material is biologicallyequivalent, which might involve only lab tests but might also include"a quick monkey study;" and third, a new regulatory filingincorporating all the new data will have to be submitted.Protein Design had hoped to have the CMV and hepatitis B antibodiesin Phase II or Phase II/III trials late this year, or early in 1995Another product Corange licensed from Protein Design is the SMARTanti-L-selectin antibody, which binds to a target on endothelial cells.Preclinical cardiovascular and cell-adhesion products are among thoseexpected to be dropped by Corange.Corange has rights to the anti-CMV and L-selectin antibodies outsideNorth America and Asia, and the anti-hepatitis B antibody outsideNorth America. Sandoz has potential North American co-promotionalrights with Protein Design to the CMV and hepatitis products, andProtein Design has all North American rights for anti-L-selectinproducts.Korn said Protein Design plans to continue developing the early stageprojects, and will seek a Japanese partner for cardiovascular products.Trial Delays `Disappointing'Werther called the trial delays a "disappointment," and said a 20percent stock drop was appropriate using Cowen's formula, based on aone-year delay of profitability. Cowen dropped its Protein Designrating from "strong buy" to "buy.""[Protein Design] has great technology, strong management _ it's justgoing to take longer to become a profitable company," Werther said."It's a serious setback, but I believe this company will overcome thoseissues."While Werther remained optimistic, Geller was even more so: "I'maggressively buying," he said, "and recommending clients buy below$20 and into the low $20s. My one-year target is $35 per share."(Cowen is projecting $30 at the end of 1995.)The trial-delay news has no impact on two other products the companyhas in the clinic. The SMART M195 antibody, which Protein Design isdeveloping, is in Phase II/III trial for myeloid leukemia.And Protein Design, in collaboration with Hoffmann-La Roche Inc.(which owns about 9.5 percent of the company), has its SMART Anti-Tac Antibody in a Phase II/III trial for prevention of graft-vs.-hostdisease, and in earlier-stage trials for kidney transplant rejection, andcertain leukemias and lymphomas.
-- Jim Shrine
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