Following receipt of a "complete response" letter from FDA as well as presumably disappointing data from a Phase IIb trial testing monthly dosing, Novartis and Human Genome Sciences ended development of their next-generation interferon Zalbin (albumin-interferon alpha 2b) for hepatitis C on Oct. 5.

The news, occurring just a few weeks before the American Association for the Study of Liver Diseases conference in Boston, came as little shock to U.S. biotech analysts and had no deleterious effect on HGS' share price, which actually increased about 1% to $29.79 on Oct. 5. For its part, Novartis paired the decision with the announcement it also is terminating clinical development of anti-fungal agent Mycograb (efungumab).

The Swiss pharma said it would incur impairment charges totaling $590 million during the third quarter due to pulling the plug on the two programs - $230 million was the loss assessed for Zalbin and $360 million for Mycograb, which Novartis acquired when it bought Neu Tec Pharma in 2006 for $569 million.

Robert W. Baird & Co., Collins Stewart, and Standard & Poor's said they had expected Zalbin's demise, after FDA issued a "discipline review" letter in June questioning the drug's risk/benefit ratio (Also see "Monthly Or Bust: Zalbin's Chances For Approval Likely Rest On Monthly Use Data" - Pink Sheet, 15 June, 2010.).

Bright Outlook Still Seen For HGS - Due To Lupus Drug

In notes issued Oct. 5, all three firms reiterated "buy" ratings on HGS stock, noting the strong potential of lupus drug Benlysta (LymphoStat-B), which has a Dec. 9, 2010, user fee date but also faces an FDA advisory committee review Nov. 16. Given Benlysta's impressive performance in the clinic and the significant unmet medical need in lupus, investors have focused recently on that drug and given little thought to Zalbin.

Zalbin has been missing from HGS investor presentations in recent months, Baird's Christopher Raymond pointed out - additionally, the HGS website doesn't include it on a pipeline list.

Salveen Richter of Collins Stewart similarly noted that Novartis pulled its marketing authorization application for the drug in Europe in April "following feedback from the EMEA that additional data would be needed to support approval, specifically assessing whether the benefit of the drug is sufficient in light of the risk profile. We did not expect Zalbin to receive regulatory approval and do not include Zalbin revenue in our model."

Novartis and HGS had hoped that Zalbin, dosed bi-weekly or perhaps even monthly, would replace two brands of weekly interferon - Roche's Pegasys (peginterferon alfa-2a) and Merck's Pegintron (peginterferon alfa-2b) -in the standard of care for HCV, along with ribavirin.

Tested head-to-head against Pegintron in a pair of Phase III trials, Zalbin dosed bi-weekly achieved statistical non-inferiority for efficacy, but Pegintron was numerically superior in both studies. In addition, Pegintron produced a better safety profile, with greater rates of treatment discontinuation (2.5% compared to 0.5%) occurring due to severe respiratory, thoracic or mediastinal disorders among Zalbin recipients (Also see "HGS Submits BLA For Interferon Zalbin For Hepatitis C" - Pink Sheet, 25 November, 2009.).

Subsequent to obtaining those data, HGS and Novartis decided to test three doses of Zalbin (1,500 mcg, 1,200 mcg and 900 mcg) given monthly over 24 weeks. The companies never released final data from the Phase IIb study, but interim data presented in March again showed statistically non-inferior but not numerically superior efficacy compared to Pegintron, with again higher rates of adverse events and therapy discontinuation.

In a release, Novartis said the decision to close the book on Zalbin was due to feedback from FDA and European Medicines Agency, as well as "new data" from the monthly dosing study. Neither company elaborated on the data or commented for this story.

Under a 2006 co-development and co-promotion arrangement, Novartis paid HGS $45 million upfront for worldwide rights to Zalbin - the deal also called for up to $460 million in development and sales milestones. Of those, Novartis at least paid HGS $40 million for completion of a Phase IIb trial in 2007 and $75 million for completion of Phase III and the decision to submit the compound for regulatory approval in 2009 ([See Deal]).

The decision to terminate Zalbin development leaves Novartis with just one HCV candidate in its pipeline - Debio025, a cyclophilin inhibitor licensed from Debiopharm in February (Also see "Novartis Boosts HCV Portfolio With First-in-Class Debiopharm Compound" - Pink Sheet, 9 February, 2010.).

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

Novartis And HGS Close The Door On Zalbin

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