BioWorld International Correspondent

The smooth transition of Speedel Holding AG into a company generating sustained revenues has encountered a little turbulence. In reporting its third quarter results last week, the Basel, Switzerland-based firm disclosed that it was in dispute with its partner Novartis AG over the latter's reporting practices in relation to aliskiren, the oral renin inhibitor approved for treatment of hypertension earlier this year. It is sold in the U.S. as Tekturna and in Europe as Rasilez.

Speedel's revenue stream from the drug comprises two elements - royalties on net sales and a share in the cost-of-goods savings that Novartis realizes through deploying Speedel's proprietary manufacturing process.

The latter is calculated by subtracting the difference between a predefined threshold and the actual cost of producing aliskiren. Speedel is alleging that Novartis, also of Basel, has failed to supply any information on the cost-of-goods savings for the first two quarters that the drug has been on the market, making it impossible for Speedel to comply with its financial reporting obligations.

"We need clarity from them to explain why they haven't reached the cost-of-goods threshold," Speedel spokesman Nick Miles told BioWorld International.

Novartis denies there is a problem. "We're absolutely confident we've given them all the information we're obliged to give and should give according to our contract," Novartis spokesman Peter Shelby told BioWorld International.

The dispute has so far been interpreted by the market as a relatively minor spat. "Right now it's a storm in a teacup," Andrew Weiss, analyst at Zurich, Switzerland-based Vontobel AG told BioWorld International. "I don't think we're in a situation like Abbott [Laboratories] vs. Cambridge Antibody Technology or Genentech vs. Protein Design Labs," he said.

Nevertheless, the amount involved constitutes a "fairly meaty" component of Speedel's overall aliskiren-associated revenue stream, Miles said.

Weiss estimated it represents approximately 3.5 percent of total aliskiren sales. "It is important for the economic development of the company," he said. Speedel's sales royalties constitute another 5.5 percent of total net sales.

Novartis originally discovered aliskiren but out-licensed the compound to Speedel, which developed a commercially viable production process that enabled the drug to reach the market. "It was the most fundamental reason why Novartis took it back," Miles said. "Without that process there would not be this drug - this drug would not be on the market."

Novartis reported revenues of $20 million for the nine-month period ending Sept. 30. Speedel reported sales-related royalties of CHF1.34 million (US$1.2 million) for the same period, a figure that includes an estimated number for the third quarter as it had not received a third quarter revenue report from Novartis before disclosing its results. It has yet to include any revenues associated with the cost-of-goods savings element of its income stream, although these are not expected to kick in until production volumes ramp up.

Sales of aliskiren, widely expected to attain several billion dollars in revenues, have so far been "disappointing", Weiss said. "We believe Novartis has been pushing the product less than expected." Although heavy sampling may have been responsible for some of the slow take-off, internal competition from the recently approved product Exforge, a combination of the angiotensin receptor blocker valsartan (Diovan) and the calcium channel blocker amlodipine, is another significant factor. "We hear that Novartis is getting its sales force to be very aggressive on Exforge," Weiss said. Exforge, approved in Europe in January and in the U.S. in June, chocked up $52 million during the first three quarters of 2007.