Salix Seeks Drug's Approval While Its Development Partner Fumes

Salix Seeks Drug's Approval While Its Development Partner Fumes [the News & Observer, Raleigh, N.C.]

From News & Observer (Raleigh, NC) (July 6, 2012)

July 06--When Salix Pharmaceuticals and Napo Pharmaceuticals inked a deal to develop the diarrhea drug crofelemer in late 2008, Raleigh-based Salix had a market cap of about $250 million.

Today Salix, buoyed in large part by growing sales of its best-selling drug Xifaxan, has a market cap approaching $3 billion with a number of promising drug indications in the pipeline.

Napo, meanwhile, is in a very different place. Having soured on its relationships with Salix and another of its crofelemer partners, India-based Glenmark Pharmaceuticals, it is seeking to terminate those agreements and retake control of the drug, which would be the San Francisco-based company’s first revenue-generating product.

"We’re remarkably disappointed, of course, and dismayed at the lack of capacity planning to supply the product for this chronic disease," Lisa A. Conte, Napo’s CEO, said in a recent interview, discussing the company’s decision to file a lawsuit against Salix in May 2011.

Salix, which sells drugs to treat gastrointestinal ailments, says Napo’s claims are without merit and its lawsuit baseless. After submitting a new drug application for crofelemer with the Food and Drug Administration in December, the company is now waiting for regulators to complete their review on Sept. 5.

"Salix intends to vigorously defend against the lawsuit and plans to continue with the development and commercialization of crofelemer in accordance with its past guidance and the terms of its collaboration agreement with Napo," the company said in a statement.

At the center of the dispute is crofelemer, a drug derived from red goo found in Croton lechleri trees in South America. Salix is seeking approval to use the drug for the treatment of diarrhea in HIV/AIDS patients.

Salix’s 2008 deal with Napo gave it the rights to commercialize crofelemer for treatment of HIV/AIDS patients in North America, Europe and Japan for a $5 million licensing fee and future milestone payments. It also gives Salix a worldwide license to develop the drug for other indications, including irritable bowel syndrome.

Strategy questioned

Peak sales for the drug’s HIV/AIDs indication are expected to be in the range of $150 million to $200 million, Tim Lugo, an analyst with William Blair, wrote in a February research note.

Lugo also wrote that, if approved, use of crofelemer could later be expanded to treat conditions that affect many more people, a drug development strategy that Salix has successfully employed with Xifaxan.

Xifaxan, which had sales of $371.7 million last year, is approved to treat travelers’ diarrhea and hepatic encephalopathy, a rare liver condition. Salix is also seeking approval to use the drug to treat irritable bowel syndrome.

Napo argues in its complaint that Salix delayed the development of crofelemer for HIV/AIDS patients -- and chose not to develop the drug for irritable bowel syndrome -- for the "anticompetitive purpose of protecting one of its own products -- (Xifaxan)."

When Napo first announced in November that it was seeking to terminate its agreement with Salix it first cited Salix’s failure to submit a new drug application for crofelemer. Napo’s complaint was later amended after Salix submitted the new drug application.

Conte said, despite the application submission, Salix has failed to prepare for the launch of the product and has no strategic vision for how the drug can be developed for various treatments.

"I would rather have Salix out of the picture and have this product back in the hands of Napo, who cares about it and prepares for it," she said. " ... Napo, I think, at this point has to be the caretaker for crofelemer."

Faulty reports

In its legal response to Napo’s complaint, Salix says Napo and its predecessor, Shaman Pharmaceuticals, which Conte also ran before it filed for bankruptcy in 2001, possessed the rights to crofelemer for 17 years before Salix became involved and failed to successfully develop the drug for commercial use.

Salix says a number of the clinical study reports previously completed by Shaman and Napo were incomplete or incorrectly analyzed. Salix says it has spent $40 million developing the drug, including $15 million it advanced to Glenmark to proceed with expanding its manufacturing capacity.

Glenmark entered into its collaboration agreement with Napo in 2005. The deal gave Glenmark the license to develop and commercialize crofelemer for treatment of diarrhea in 140 countries.

In a December letter, Glenmark said it "vehemently denies Napo has any basis for terminating the collaborative agreement." The case is now before the American Arbitration Association, which granted Glenmark’s request for an interim order directing Napo to comply with the agreement while a ruling is pending.

The Salix lawsuit is now in the discovery period, with the two sides exchanging documents and taking testimony. That will lead to a summary judgment in the case, with Salix seeking to get it tossed out.

As for Napo, it’s now in the awkward position of putting out press releases to note crofelemer’s progress through the regulatory process while at the same time bashing the company that filed the application.

Bracken: 919-829-4548

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Posted: July 2012


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