Telios Pharmaceuticals Inc. announced Monday that itsJapanese development partner, Ono Pharmaceutical Co. Ltd.,has decided not to pursue additional clinical development ofOcuNex ophthalmic solution for treating corneal woundsassociated with severe dry eye.

Apparently, the Phase II trial results suggested productefficacy, but were not compelling enough to convince Ono ofOsaka that continued product development made goodeconomic sense.

"Ono's option on OcuNex in Japan, South Korea and Taiwan wasabout to expire," explained Audrey Keane, director of corporatecommunications at Telios of San Diego. She explained that Ono'sdecision was based on the presence of low-priced competingproducts already in the Japanese market, as well as the beliefthat it will be difficult to obtain an acceptable approved pricefrom Japanese regulatory authorities (which compare newdrugs to those already on the market).

Under the terms of the agreement between the two companies,inked in May 1990, "Telios has already received a $3 millionpayment for the option (on OcuNex)," Keane said.

There was to be an "additional $2 million payable upon theachievement of certain milestones in the future," which Telioswill no longer receive. However, Keane told BioWorld, Ono maycome back later for a license. And, she added, "Telios is nowfree to negotiate a worldwide agreement for distributingOcuNex."

Meanwhile, Telios (NASDAQ:TLIO) is continuing its owndevelopment of OcuNex and is about to start a Phase II trial inthe U.S. Ono will be waiting for those results -- which Teliosdoesn't expect to see until the second half of 1994 -- toreconsider its position in the event that strong efficacy isdemonstrated.

Ono still owns 8.9 percent (2.2 million shares) of Telios commonstock and is still Telios' development partner in Japan, Koreaand Taiwan for decorin, a product being developed for treatingfibrotic diseases afflicting the kidneys, lungs and liver.

Telios' stock closed at $6.25 a share on Monday, up 38 cents.

-- Jennifer Van Brunt Senior Editor

(c) 1997 American Health Consultants. All rights reserved.