BresaGen parts company with British Biotech

Adelaide-based company BresaGen (ASX: BGN) and British Biotech have ended a collaboration to develop GM-CSF antagonist E21R, after fresh tests failed to confirm previous assessments of its commercial prospects.

BresaGen also released its financial results for the quarter, saying that budget implications would follow the ending of the E21R trials, with BresaGen taking steps to extend its cash reserves beyond the next 12 months.

Earlier this month, British Biotech announced that it had stopped a Phase II clinical study of the compound in acute myeloid leukaemia (AML) patients after an independent pre-clinical study failed to support the high incidence of apoptosis, or cell death, found in previous work.

At the time of that announcement, BresaGen said the UK group simply planned to slow down the AML trial because it wished to do more pre-clinical work on the technology and redesign the research protocols.

It also said that trials of the drug in other forms of the disease - including myelomonocytic leukaemias, chronic myelomonocytic leukaemia (CMML), and juvenile myelomonocytic leukaemia (JMML) - would continue as planned.

The drug was also to be used in a pilot Phase II rheumatoid arthritis (RA) study in which patients would receive four 10-day courses of daily subcutaneous injections of E21R.

But in today's announcement, the companies advised that all existing trials would be halted, as would all planned patient recruitment programs.

BresaGen said it now intended to work with the discoverers of E21R, the Hanson Institute and the Institute of Medical and Veterinary Science in Adelaide, in order to review other data and discuss the possibility of repeating some of the critical pre-clinical studies.

The company said the any decision to recommence clinical studies would depend in this information and on a reassessment of the commercial value of this therapy in RA, JMML and CMML.

Under the agreement, British Biotech was responsible for conducting the clinical studies needed to obtain regulatory approval for E21R as a treatment for AML. It also gave the company exclusive rights to commercialise the drug for all leukaemic and non-leukaemic indications.

E21R was licensed and developed through manufacture and Phase I testing by BresaGen and subsequently licensed to British Biotech in a collaborative development program.

Under the latest changes, the rights to commercialise the drug now revert to BresaGen.

BresaGen president and chief executive officer Dr John Smeaton said the dissolving of the collaboration was an unfortunate follow-on of the earlier announcement.

He said that ending the agreement was the "proper thing to do at this stage". "I think the relationship between the two is still a good one," Smeaton said. "We're both regretful the collaboration ended in a less positive manner than we would have liked."

He said he expected the review process to take about six months and felt confident that encouraging data would be found to at least progress the use of E21R in JMML.

But Smeaton said that, because the rarity of the disease made it commercially unviable, development would need to take place with funding support from a body such as the National Institutes of Health.

British Biotech began its Phase II study on the efficacy, safety, tolerability and pharmacokinetics of E21R in AML patients in August 2001, halting it less than a year later.

In addition, the UK company said it had now been advised by external experts that, in view of the new pre-clinical data, a proposed Phase I clinical study in children with various myeloid leukaemias could not proceed on ethical grounds. The proposed study was thought to be a pre-requisite for efficacy studies in JMML.

British Biotech said it had written off $870,000 in respect of the unamortised amount of milestone payments made to BresaGen.

Strong cash position

In a separate announcement today, BresaGen said its latest quarterly report had revealed a strong cash position and manageable cash burn rate. The company said its cash balance at 30 June 2002 was $16.2 million, having spent $2.3 million in the last quarter and $9.6 million over the previous 12 months.

BresaGen also reported that it was continuing to invest heavily in research and development, having spent $2.4 million in the last quarter and $6.5 million in the past 12 months, with a major component of this being stem cell therapy research at its operation in Athens, Georgia, in the United States.

At the time of writing, BresaGen's shares were trading at slightly over 39 cents, almost 60 per cent lower than its price just two months ago.