BioWorld International Correspondent

Basilea Pharmaceutica AG gained outright ownership of its lead development candidate, BAL5788, following a decision by its parent firm, F. Hoffmann-La Roche Ltd., not to pick up an option on the compound.

The news dropped Basel, Switzerland-based Basilea's shares, which trade on the Swiss Stock Exchange (SWX:BSLN), down CHF8.75 Tuesday, to a close of CH77.50 (US$61.09). It is trading well below its recent initial public offering price of CHF98 per share. The IPO near the end of March brought the company CHF205.8 million.

Basilea, which was formed in 2000 as a spinout from Roche, raised gross proceeds of about CHF206 million at that time.

BAL5788, a novel cephalosporin antibiotic for treatment of complicated skin and skin-structure infections, is scheduled to enter a Phase III trial in the second half of the year.

"We're going forward with the Phase III, no matter what," Chief Financial Officer Ron Scott said. "At the same time, we've been contacted by big pharma and we're talking to them."

Karl Heinz Koch, senior pharmaceuticals analyst at Zurich, Switzerland-based Lombard Odier Darier Hentsch & Cie, said, "In order to optimize the value of the company and the compound, they have no choice but to push ahead - and they have the money to do it."

The company had CHF75.5 million in cash, cash equivalents and short-term investments as of Dec. 31.

BAL5788, which has FDA fast-track status, has a broad spectrum of activity against Gram-negative and Gram-positive bacterial pathogens, including methicillin-resistant Staphylococcus aureus. Roche, also based in Basel, has a 33 percent stake in Basilea and has first right of negotiation on the product, should it emerge from Phase III studies without a partner. But Basilea has sufficient resources to commercialize the product itself, should it fail to agree to terms with potential partners, and Scott said the company would "want to at least participate in the marketing of the compound."

Basilea aims to launch the product in 2007, Scott said. Lombard Odier has estimated peak annual sales at $500 million. However, the targeted launch date could be optimistic.

"It would be prudent to add a delay of at least a year based on the evidence we've had with other [anti-infective] products," Koch said. He added that conflicts have occurred as drug regulators seek to narrow the spectrum of usage of new products in order to minimize resistance, while drug companies seek to widen it in order to maximize revenues.

Basilea has two other products in clinical development. BAL4079, an oral retinoid for the treatment of chronic hand dermatitis, also is due to enter a Phase III study in the second half of the year. BAL8557, a broad-spectrum oral and intravenous antifungal agent, completed a Phase I trial in February.