Knobias Clip Report (10-26-2007)

Submitted By Knobias ClipReport

KOSN: CEO Comments on Roche's Termination of Epothilone Collaboration

Roche provided notice that it is terminating its collaboration agreement with Kosan Biosciences Inc. (KOSN) for the development of the Company’s current epothilone anticancer product candidate, KOS-1584, and any other epothilones developed under the collaboration in the field of oncology. Following the effectiveness of the termination of the agreement in 120 days, all licensed rights will revert to Kosan.

Roche said it is terminating the Epothilone Collaboration Agreement for its “convenience” as provided for under the agreement. Kosan believes that Roche is terminating the agreement as a result of a re-prioritization within Roche’s research and development group.

In a conference call today, Kosan president and CEO Robert G. Johnson, Jr., M.D., Ph.D. said, "We do not speak for Roche, but we believe that it was unrelated to the value of KOS-1584. Roche has been a good partner, and they believe in the drug just as we do."

"We did not expect this decision by Roche. We have met all of the milestones in the development of KOS-1584. While we were initially disappointed, but we quickly realized that there are some tangible benefits to reacquiring KOS-1584. We will welcome other opportunities to advance KOS-1584. We plan to proceed with Phase II trials soon, but we will not be able to provide details and indications that we will pursue until the end of the month."

Dr. Johnson added, "Our agreement with Roche four years ago provided a $25 million upfront payment to us with milestone and royalties at comparable amounts for that time. We would expect any future deal structures to be more favorable than that."

Epothilones are a new class of cytotoxic molecules that have been identified as potential chemotherapy drugs. The epothilones appear to be well tolerated, with a side effect profile that is similar to that reported with the taxanes (paclitaxel and docetaxel), but studies indicate superior efficacy to the taxanes. KOS-158 has demonstrated antitumor activity and tolerability in patients with solid tumors. It has shown signs of activity in patients with non-small cell lung, ovarian, breast, prostate, pancreatic, head and neck and colon cancer.

The FDA recently approved Bristol-Myers' (BMY) Ixempra(R)(ixabepilone), an epothilone, for women with advanced breast cancer that does not respond to other therapies. It was approved as a stand-alone treatment for patients with advanced tumors that do not respond to Roche Holding AG's Xeloda(R)(capecitabine). Leading drugs for metastatic breast cancer currently include Bristol's older Taxol(R)(paclitaxel), Sanofi-Aventis' (SNY) Taxotere(R)(docetaxel), Xeloda and anthracyclines (daunorubicin, doxorubicin, and epirubicin, idarubicin and mitoxantrone). According to industry analysts, Ixempra(R) could generate annual sales of $500 million by 2012.

Dr. Johnson noted, "This new class of epothilones has already been validated with the approval of Ixempra. The market is waking up to the promise of epothilones, and interest has increased significantly. We see no reason that this will not continue, and we intend to take full advantage of this interest."

"In the short term, the impact of Roche's termination will be minimal and have no financial impact for 2007. It is also important to note that there is a rich history in recent examples of companies reacquiring successful drugs. We believe that KOS-1584 has the potential to achieve best-in-class status in the emerging epothilone market as well as to compete in the established taxane market."



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