Reflecting a mutual desire to meet next time in themarketplace instead of the courtroom, Centocor Inc. and XomaCorp. said Wednesday they've agreed to settle a two-year legalwrangle over conflicting patent claims to anti-sepsis products.

Under terms of the settlement, Centocor agreed to pay Xomaundisclosed royalties for any U.S. sales of its monoclonalantibody HA-1A, trade named Centoxin, as ordered by the U.S.District Court in San Francisco last December.

Both Centoxin and Xoma's competing E-5 were earlier this yearsent back by the FDA for additional study. Centocor has starteda second round of Phase III trials to support its claims ofCentoxin's effectiveness, and Xoma last month submitted to theFDA additional data from completed Phase III studies.

The deal struck by the two companies ends all remaininglitigation and disputes over each other's products, patents andpatent applications. It also covers other products using anti-endotoxin monoclonal antibodies, Xoma said.

Xoma's stock (NASDAQ:XOMA) climbed $1 a share onWednesday, closing at $14.25. Centocor (CNTO) gained 25 centsa share, closing at $15. Both stocks are trading in the lower endof their 52-week price ranges. Centocor of Malverne, Pa., hasbeen as high as $60.25 a share and Xoma of Berkeley, Calif., hasbeen up to $26.25.

According to Xoma spokeswoman Carol DeGuzman, thecompanies started negotiating a resolution of their differencesseveral months ago. They decided for practical reasons not tocontinue litigation.

Xoma initiated the lawsuits in April 1990 by filing aninfringement claim that challenged Centocor's U.S. patent, No.5,057,598, which includes claims relating to monoclonalantibodies used in treating gram-negative bacterial infections.Xoma's U.S. patent, No. 4,918,163, covers the use of anti-endotoxin antibodies in treating humans with gram-negativesepsis.

Sepsis is a blood infection that kills 175,000 people a year. Thepotential market for a sepsis drug is estimated at $500 million.

Centocor's restructuring last April, following the FDA's requestfor more clinical data, and a change in presidents at Xoma wereimportant factors in the two companies' decision to settle theissue, said Michael Wall, chairman of Centocor's executivecommittee.

Centocor's new strategy is to develop additional collaborativerelationships with other companies, according to Wall.

"We would like to shut down battles and join forces wherepossible," Wall said.

Although technically not a cross-licensing agreement, theCentocor-Xoma pact is one in concept because each companywill recognize the other's patents., he said.

Centocor and Xoma face increasing potential competition indeveloping drugs to treat sepsis. Among the potential rivals toCentoxin and E-5 are:

-- Immunex Corp.'s soluble tumor necrosis factor (TNF)receptor, which recently entered Phase I clinical trials.

-- Ribi ImmunoChem Research Inc.'s MPL, which is about toenter combined Phase I/II trials using a multiple-doseregimen.

-- Synergen Inc.'s interleukin-1 receptor antagonist (IL-1ra),which is in Phase III trials.

-- Cortech Inc.'s CP-0127, an anti-inflammatory againstbradykinin, for which an investigational new drug applicationwas filed in May.

Potential competition was not a pivotal factor in the decision ofCentocor and Xoma to settle their patent fight, Wall toldBioWorld.

"The competition may have products, but as yet data fromPhase III trials has not been provided, and no one can drawconclusions until such data is available," he said.

Centocor's timetable for Centoxin largely rests on how long itwill need to accrue several thousand patients into the newPhase III trials, Wall said.

In the three months since the FDA's decision on Centoxin,Centocor has strengthened its financial position to handle thenew trials and extended review, he said. An agreementannounced July 16 provides for Eli Lilly & Co. to put $125million into Centocor, including $50 million specifically forCentoxin development. Lilly received worldwide co-marketingrights to the drug in exchange.

HISTORY OF XOMA/CENTOCOR DISPUTE

April 1990: U.S. patent 4,918,163 issued to the University ofCalifornia, which it exclusively licenses to Xoma. Xoma suesCentocor, for patent infringement. Centocor countersues.

July 1991: Xoma-Centocor trial begins in the U.S. District Courtin San Francisco.

Oct. 17, 1991: Centocor issued U.S. patent 5,057,598 with claimsto the composition of Centoxin.

Oct. 28, 1991: A six-member jury decides that Centocorinfringed Xoma's patent. Xoma files an injunction against salesof Centoxin. December 13, 1991: U.S District Court ordersCentocor to pay royalties to Xoma on uses and sales of HA-1A(Centoxin).

Jan. 31, 1992: Centocor's motion to set aside the October 1991verdict is denied.073092XOMA/CENTOCOR

-- Michelle Slade Associate Editor

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

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