An arbitration panel has ruled that NaPro Biotherapeutics Inc.misappropriated trade secrets from Hauser Chemical ResearchInc. for the production of the cancer drug Taxol, Hauserannounced on Thursday.

Hauser (NASDAQ:HAUS) of Boulder, Colo., reported that after anine-day hearing, a private arbitration panel in Denverdetermined that "NaPro had misappropriated certain tradesecrets that were used in Hauser's first- and second-generationprocess for manufacturing paclitaxel (Taxol)."

NaPro was founded in 1991 as a taxol-isolation business byformer Hauser employees, who Hauser said breached theirnon-disclosure agreements. After settlement attempts failed,Hauser said it began an arbitration proceeding against NaPro.Hauser is now requesting that the District Court in Boulderissue an order for NaPro to cease and desist from usingHauser's trade secrets.

The arbitration panel ordered NaPro, also of Boulder, to ceaseand desist such activities and to withdraw a pending patentapplication to prevent the exposure of a trade secret belongingto Hauser.

Hauser has an exclusive contract to supply Bristol-MyersSquibb with Taxol that will expire on Aug. 14. Michelle Hinkle,an investor relations representative at Hauser, said thecompany is negotiating with three other companies for taxolproduction and will enter a partnership with one of thembefore the contract with Bristol-Myers expires.

Hinkle said Hauser will be moving out of private land resourcesfor taxol to cultivated sources. The company is growing its ownPacific yew trees to continue isolating taxol from the bark ofthe tree. It will also produce a semi-synthetic taxol, utilizing adifferent taxane from the bark. The bark of the Pacific yew isthe only FDA-approved source of taxol.

Hinkle said that in the past there was concern about using thePacific yew for taxol production because it was thought to berare. The Bureau of Land Management gave the tree moderateprotection status. Hinkle noted that Hauser is only using treesthat are already scheduled to be cut down. She added that thetree's wood is too soft for use in commercial building.

The production process has evolved so that fewer trees areused to produce the same quantity of Taxol. Hinkle said it nowtakes less than 13,000 pounds of bark for one kilogram of drug;previously, 30,000 pounds of bark were required to producethat amount. This means that the bark from 1.6 trees is usedper treatment cycle of 2.3 grams of Taxol per patient.

-- Brenda Sandburg News Editor

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