Although one market analyst categorizes as "pocket change" Cephalon's £10 million ($15 million) upfront payment for the option to license lupus candidate Lupuzor from Immupharma, the U.K. biotech says it now may have enough cash to run its business for several years and possibly even pay its shareholders a small dividend.

Immupharma's stock closed at £0.59.5 (less than $1) on Nov. 26, giving the firm a market cap of just £33 million ($50.7 million). But in an interview, CEO Dimitri Dimitrious remained optimistic about the company's chances, noting that it now has enough funds to support the remaining Phase II trials with its potential blockbuster Lupuzor.

Should Cephalon elect to license the CD4 T cell modulator, the U.S. company will be responsible for all further development and commercialization costs associated with the product (¹ [See Deal]). In addition to the $15 million option payment, Immupharma stands to receive up to $500 million from an unspecified license fee, clinical and regulatory milestones, and royalties which Dimitrious calls "much higher than just double-digit."

Interim Phase IIb data for the efficacy, safety and tolerability of Lupuzor are expected within six to eight weeks. Immupharma won't have to wait long for Cephalon to make up its mind about brining the medicine in-house: Dimitrious anticipates the company will make a decision during the first half of 2009.

Dimitrious said Cephalon did substantial due diligence on Lupuzor, so the deal suggests the Frazer, Pa.-based specialty pharma is very confident about getting positive data.

Analyst Savvas Neophytu of Panmure Gordon & Co. agrees, writing in a Nov. 25 note that either "Cephalon's due diligence has unearthed hidden value or the - as yet unblinded - data emerging from the ongoing Phase IIb trial is likely to be exceptionally good."

"The devil's advocate's view would be that $15 million represents pocket change for Cephalon, and it was used to block bigger competitors from overtaking them in the stampede that usually ensues positive Phase IIb data,' Neophytu wrote.

Potential game-changer in lupus

Lupuzor has been pegged as a potential game-changer in lupus, with earnings peaking as high as $4 billion to $6 billion annually. A human protein fragment, it theoretically desensitizes the body to the cause of lupus, Dimitrious explained. The Phase IIb trial is studying two doses against a steroid standard of care in roughly 100 patients in the EU and Latin America.

The primary endpoint for efficacy is a four-point reduction in SLEDAI score, Dimitrious said, and the drug would be marketed as once- or twice-monthly injection. The trial includes a 12-week dosing scheme, followed by a 12-week monitoring period and then an open-label study for patients who want to continue therapy.

Proceeds from a pair of private placements in July brought in about £2.7 million ($4.1 million), and Immupharma obtained a £900,000 ($1.4 million) grant from the French government earlier this month to develop a preclinical cancer compound. Dimitrious says Immupharma has about $15 million on hand and burns cash at about an annual rate of £3 million ($4.6 million), leaving it "one of the best funded" biotechs.

"I think we have more cash than we need now, in which case I hope we will be able to start to distribute dividends," he said.

Research partnership minimizes R&D costs

Key to the company's limited cash burn is its long-term research partnership with France's Centre National de la Recherche Scientifique (CNRS), which discovered Lupuzor. Immupharma pays CNRS an annual collaboration fee and the center also will receive royalties if Lupuzor reaches market.

"It's not our own research capability but it's a close as you can get to it," Dimitrious said. Instead of a high-spend R&D operation, which might entail hiring 50 PhDs, he said, the collaboration gives his company access to dozens of PhDs and their work. "For which we pay them very little. If we had our own labs and did research, this would be very expensive."

Immupharma's pipeline currently includes four preclinical compounds for cancer, moderate-to-severe pain, hospital-acquired infections and inflammation. Its plan is to advance IPP-204106, a nucleolin antagonist for cancer angiogenesis, into Phase I next year. Dimitrious suggested a U.S. biotech with Immupharma's pipeline might sustain annual cash burn between $20 million and $30 million.

Immupharma could have partnered Lupuzor with a big pharma or waited until after Phase IIb data were available to make a deal, he added, but the biotech sees Cephalon, which has more than 600 sales staff and significant specialty drug experience, as the ideal partner. Cephalon recently won FDA approval for the oncologic Treanda and has several other drugs on the market (² Also see "Cephalon’s Treanda Approved For Indolent Non-Hodgkin’s Lymphoma" - Pink Sheet, 31 October, 2008.).

Although the company's original goal - which Dimitrious likened to a nice Powerpoint presentation but not based in market reality - was to keep its products in house and commercialize them itself, he now sees bringing candidates in high-needs areas to Phase III and out-licensing as less risky financially.

"What we have done now is make the company safe and profitable," he said.

-Joseph Haas (j.haas@elsevier.com)

Sale Of Lupus Drug License Option To Cephalon Sets Up Immupharma Business Strategy

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