National Editor

Tanox Inc. said an arbitration panel has issued its award with regard to a dispute between the company and Novartis AG regarding a pair of anti-immunoglobulin E antibodies, but in an earlier California decision, "the judge actually ruled the other way around," said Nancy Chang, president and CEO of Tanox.

The panel said Tanox, under a 1990 agreement with Basel, Switzerland-based Novartis, does not have the right to independently develop the anti-IGE antibody TNX-901. At the same time, the panel said, Novartis is obligated under the same agreement to share with Tanox it's "know-how" regarding Xolair (omalizumab), another anti-IGE antibody that is further along in development with Novartis and South San Francisco-based Genentech Inc.

Almost exactly one year ago, the U.S. District Court for the Northern District of California found that Tanox had a right to independently develop certain anti-IgE antibodies, and ruled that Tanox could use information acquired under its tripartite agreement with Genentech, of South San Francisco, and Novartis.

"The [new arbitration order] is lengthy and complex, and it's too early to give a detailed analysis," Chang told investors during a conference call.

Also unclear is whether the arbitration panel's first award must stick.

"I believe we do have the right to appeal this action," Chang said. "It's somewhat difficult to overturn an arbitration decision."

She said Tanox maintains that "we have independent rights on anti-IGE antibodies," if not for TNX-901, a treatment for peanut allergies.

The conference call gave analysts little to chew on, and Chang said Houston-based Tanox would have not much more to say than has been disclosed in its press release. Ashraf Hanna, director of strategic planning for Tanox, said the company "remains in a very strong financial position, with $244 million in cash as of June 30 and a very controlled burn rate that gives us a long time."

He told BioWorld Today later that Tanox had a burn rate of about $30 million last year. The burn rate will go up when TNX-901 enters Phase III trials, but the time line on that is uncertain. So far, the drug has proven positive in early Phase II results, with data submitted to a scientific journal for publication.

"We had a potential Phase III trial design worked out," Hanna said, and the company has been in talks with the FDA. Another Tanox drug, TNX355, a monoclonal antibody, is in development for HIV.

"Phase I data should be out early next year," Hanna said.

Xolair, for asthma, is expected to be the subject of a biologics license application filing by the end of the year. If it is approved, Tanox would get a milestone payment plus royalties of about 10 percent. The drug became stalled last year with the FDA when the agency asked for more data. (See BioWorld Today, July 11, 2001.)

Tanox's lawyers are sifting through the arbitration ruling, and the company is waiting.

"There are several contracts at issue here, with room for further arbitration and further litigation," Hanna said. The California summary judgment seemed to settle the litigation with Genentech and Novartis, but both "may have appealed by now," he said.

"There's value in considering a conciliatory end to all this," Hanna said. "Sometimes, even if we have a legal avenue open, it might be the best business strategy."

What happens next?

"I have no idea," he said.

Tanox's stock (NASDAQ:TNOX) closed Thursday at $9.03, down 80 cents.