In an era where most product- and innovation-hungry big pharma firms have been desperately promoting themselves as "best partners," it is perhaps easy to forget what can go wrong when a biotech entrusts its asset to a larger firm.

Except if you're Basilea. So frustrated had this biotech become with the efforts - or the perceived lack thereof - of partner Johnson & Johnson to get their partnered anti-infective ceftobiprole smoothly past the EU and U.S. regulators, it has resorted to arbitration.

The biotech announced on Feb. 24 that it is seeking damages resulting from the delays to the drug's approval and thus to the milestone payments owed by Johnson & Johnson. The last straw, it seems, was news released on the same day that the EU's Committee for Medicinal Products for Human Use halted its review of ceftobiprole for complicated skin and soft tissue infections, including diabetic foot infections, pending Good Clinical Practice inspections.

CHMP had already recommended the drug for approval in November 2008, but that recommendation must now be revisited post-inspections, and the delay could put potential approval well into next year.

Two-Year Delay At FDA

In the U.S., the process has dragged on even longer. Johnson & Johnson, which licensed exclusive worldwide rights to ceftobiprole in February 2005, submitted the NDA in May 2007. FDA issued an "approvable letter" in March 2008, citing need for additional study site inspections, evaluation of microbiological data and further characterization of patients with diabetic foot infections (¹ Also see "FDA Wants More Ceftobiprole Data From J&J/Basilea" - Pink Sheet, 18 March, 2008.).

After accepting J&J's response in September, the agency issued a "complete response" letter in November because of data integrity issues, including need for additional clinical site audits and resolution of study conduct deficiencies (² Also see "J&J/Basilea’s Ceftobiprole Gets Another Setback" - Pink Sheet, 26 November, 2008.).

Basilea said Feb. 24 that it expects J&J to complete the audits in the first half of 2009, and submit a complete response in the second half.

The company has been careful to reassure analysts and disgruntled shareholders that there is no issue with the clinical data from the drug's pivotal studies, saying that the problems were instead related to trial site monitoring and quality assurance. "The delay is due to a [data monitoring] process issue, not due to the clinical data" themselves, said CEO Anthony Man on the Feb. 24 earnings call announcing the news (³ IN VIVO, Feb. 24, 2009).

Analysts do not appear worried that data will be affected by the inspections. UBS Investment Research analysts Martin Wales and Guillaume van Renterghem wrote in a Feb. 25 note that FDA removed data from only three clinical sites from the data package, and the trial still met its endpoint despite the slightly reduced dataset.

"Given the large number of [sites] involved in the two clinical trials," the analysts wrote, "we believe that, should the EMEA decide to remove more [sites] than the FDA did, the likelihood of the study losing statistical power is rather low."

Still, CFO Ron Scott said during the earnings call, "there are questions about how the trials are monitored and run and this has caused a delay." He went on to describe the arbitration process as "the mechanism we have to address that delay."

Basilea and J&J aren't the only antibiotic sponsors grappling with the impact of regulatory delays for novel drugs aimed at cSSSI. Arpida and Targanta have been forced into restructuring and are looking for partners (although perhaps Basilea would say be careful what they wish for) to help them conduct the additional clinical trials needed (⁴ Also see "FDA Updating Antibiotic Guidances, But Is It Too Late For Some Sponsors?" - Pink Sheet, 9 February, 2009., p. 30). Theravance is in a better position, though it still faces at least a six month delay (see ⁵ Also see "Telavancin’s “Complete Response” Letter Calls For Pregnancy-Focused REMS" - Pink Sheet, 2 March, 2009.).

Arbitration Could Take Two Years

Arbitration is a complex, expensive last resort option for resolving disputes. Clearly, the partners have not been able to sort out the issues between themselves, and Basilea had gotten desperate. Whatever the eventual outcome - and management warned that these processes can take up to two years - the small biotech will suffer far more than its partner in the interim.

Already, the company's shares have fallen by over 60 percent since the beginning of February. In anticipation of ceftobiprole's launch in the U.S. and EU, where Basilea plans to co-promote the drug, it has shifted resources into commercialization activities, both for ceftobiprole and for its severe chronic hand eczema drug alitretinoin ( Toctino ), which Basilea now sells in three EU markets on its own.

In order to help fund these activities, Basilea had been counting on over CHF100 million in estimated milestones from J&J in conjunction with ceftobiprole's approvals in the U.S. and EU.

Those milestones are now unlikely to appear until the arbitration process is over. Basilea has about CHF293 million, or two years' worth of cash, assuming no cash inflow, according to Wales and van Renterghem. It also has several early-stage development programs and a Phase III antifungal, isovuconazole, which it could, if necessary, license out.

Meanwhile, though, J&J will be defending its ground. "We're fully prepared to enter the arbitration process," said a spokesperson. The spokesperson went on to say the company was "somewhat surprised" to receive the news, however, as "we are fully committed to moving forward with the regulatory agencies and to getting the drug approved."

Ceftobiprole is approved in Canada (under the trade name Zeftera ) and Switzerland (as Zevtera ) as a broad-spectrum antibiotic, notably with activity against methicillin-resistant Streptococcus aureus, for treatment of cSSSI, including diabetic foot infections.

- Becky Jungbauer (r.jungbauer@elsevier.com)

Basilea Takes On Partner J&J In Arbitration Claim Over Ceftobiprole Delays

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