Washington Editor

Looking to re-position a clinical-stage compound with an unfulfilled past, Zephyr Sciences Inc. in-licensed Neuprex and related bactericidal/permeability-increasing protein (BPI) products in a deal that could be worth more than $73 million to XOMA Ltd.

Specifically, New York-based Zephyr gained an exclusive worldwide license for the research, development and commercialization of BPI products, including Neuprex. The first of several drugs XOMA developed from BPI, Neuprex is an injectable formulation of a modified recombinant fragment (rBPI21) of the molecule. It formerly was partnered with Baxter Healthcare Corp. and has been studied in a variety of indications, including Phase III trials for severe pediatric meningococcemia and infection.

"We're product-focused investors," Aaron Davis, Zephyr's director of business development, told BioWorld Today. "We look for interesting products that maybe need re-positioning for one reason or another, and BPI has an extensive track record of product development at XOMA."

Both Zephyr and Berkeley, Calif.-based XOMA noted that BPI has potential utility in multiple disease indications. Nevertheless, no BPI product has been approved to date, with Neuprex being a notable example of the difficulties of drug development.

The compound has followed a bumpy development path for some time. Five years ago, XOMA stopped a Phase III trial designed to evaluate the drug's ability to prevent infection in patients who have undergone hemorrhagic trauma. A year later, an agreement was reached to give Baxter worldwide rights in all indications in a deal worth up to $35 million. Three months after that deal was struck, the FDA decided that XOMA did not have sufficient data to file a biologics license application for Neuprex in meningococcemia. (See BioWorld Today, Sept. 28, 1999; Jan. 26, 2000; and April 26, 2000.)

Deerfield, Ill.-based Baxter ended its partnership with XOMA in July 2003 after the drug's development in systemic anti-infective and anti-endotoxin indications was halted. (See BioWorld Today, July 9, 2003.)

The product also has been evaluated in Crohn's disease sufferers and in pediatric patients with congenital heart abnormalities requiring open-heart surgery associated with cardiopulmonary bypass.

Zephyr is not abandoning indications in which Neuprex previously has been evaluated, but is clearly focused on re-positioning its development going forward.

"Right now, we're not disclosing trial design or exact therapeutic areas," Davis said, also declining to disclose indications in which other BPI products could be further developed. "But we are actively pursuing it."

For its part of the latest licensing arrangement, XOMA is entitled to receive license fees totaling up to $11 million and milestone payments totaling up to $62 million, as well as royalties. The arrangement also includes due diligence provisions related to the development of BPI in multiple indications. Zephyr will fund all future research and development activities, though more specific financial terms were not disclosed.

"Zephyr obviously feels there is some potential with disease therapeutics," Deb McManus, XOMA's manager of corporate communications, told BioWorld Today. "Sometimes it's about finding the right partnerships, and certainly in this industry, the pathway a product takes is not always linear. And for a product like Neuprex, which has had an up-and-down historical path, as technology improves and changes the landscape, there are partners who see its potential."

The agreement does not cover BPI-derived peptide products such as XMP.629, a gel that recently proved inconclusive in a Phase II trial for acne. (See BioWorld Today, Aug. 18, 2004.)

BPI, a human protein found in neutrophils, represents a natural defense against bacterial infections. It was discovered by researchers at New York University School of Medicine, and XOMA has collaborated with the school since 1991 to extend and apply BPI-related research for commercial purposes. Its now-licensed BPI-related intellectual property portfolio includes more than 80 U.S. patents, more than 20 U.S. patent applications and corresponding foreign patents, and applications all directed to compounds and compositions, manufacturing methods, formulations and therapeutic uses of BPI protein products. The portfolio includes a number of patents exclusively licensed from NYU and Incyte Corp., of Wilmington, Del.

For Zephyr, the BPI license represents the first of several planned in-licensing deals.

"We are actively in-licensing compounds, but are not particularly focused on any therapeutic areas," Davis said. "We're looking to in-license successful products, and then we will mobilize our capital and maybe other capital behind products, as well as get the appropriate expertise to back products individually."

The company was founded a year ago by Andrew Gitkin, president and CEO. He formerly worked as a senior biotech analyst at UBS Warburg.

Zephyr's financial backers include a group of experienced biotech investors, Davis said. But the company has not disclosed the amount of private funding it has raised. In terms of late-stage drug development and commercialization plans, Zephyr will decide whether to move products forward internally or in concert with partners on a product-by-product basis.

"We just look to have the appropriate team behind a product," Davis said. "[In the near term], hopefully we'll have positive news on the future development of BPI-derived products, further partnerships on compounds we're looking to in-license, and maybe a lot of compounds that we may in-license at an earlier stage would receive more news later on as they proceed through development. We look to be very active and involved both on the in-licensing side and the partnering side."

On its own partnering front, XOMA two months ago entered a worldwide collaboration with Aphton Corp., of Miami, for the treatment of gastrointestinal and other gastrin-sensitive cancers using anti-gastrin monoclonal antibodies. Earlier this year, XOMA entered a worldwide exclusive agreement focused on cancer antibodies with Chiron Corp., of Emeryville, Calif. (See BioWorld Today, March 2, 2004.)

On Thursday, its shares (NASDAQ:XOMA) lost 5 cents to close at $2.16.