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Feb 20, 2013

Future Bleak for Thallion After Failed LFB Collaboration

  • Thallion Pharmaceuticals said today it terminated a collaboration with LFB Biotechnologies to develop two monoclonal antibodies against Shiga toxin-producing E. coli (STEC) infections, and launched a strategic review that could result in the company being sold or merged with a partner.

    “Despite our strong collaboration, an internal pipeline prioritization necessitated a reallocation of our resources,” Guillaume Bologna, LFB’s executive vp for development & business development, said in a statement. LFB, which racked up €432.4 million ($578.3 million) in 2011 revenues, focuses on immunology, intensive care, and hemostasis treatments, and 60% of LFB products are indicated for rare diseases.

    Thallion said it took back rights to its Shigamabs® program, including all data, materials, and know-how developed by and for LFB during a collaboration launched two years ago this month. The company also hired an undisclosed “leading healthcare-specialized investment banking group” to conduct the review.

    “Thallion has not established a definitive timeline to complete its review and will be assessing all available alternatives within the next few months,” the company said.

    Under the companies’ development and commercialization agreement, Thallion granted LFB an exclusive license for the commercial rights to Shigamabs in Europe, South America, and other “territories of strategic interest to LFB,” including Russia, Turkey, China, South Korea, and unspecified Northern African countries. Thallion retained commercial rights for the rest of world, including North America.

    Thallion was eligible for up to €95 million (about $127.2 million) from LFB—including a €1.5 million ($2 million) up-front payment, funding for substantially all future clinical development costs, and payments for Shigamabs tied to development, approval, and commercial sales milestones. Thallion was also eligible to receive tiered, double-digit royalties based on product sales in all the LFB territories.

    With the end of the agreement, Canadian-owned Thallion loses out on future quarterly payments from LFB—an affiliate of the Laboratoire français du Fractionnement et des Biotechnologies of Les Ulis, France—while incurring all remaining costs associated with completion of the SHIGATEC Phase II clinical study. LFB will pay for all outstanding and accrued costs related to product manufacturing.

    The separate announcements on the LFB collaboration and strategic review come less than five months after Thallion predicted its cash would allow it to sustain itself for a year or more: “The company believes that its cash position will be sufficient to finance its operations and capital requirements for at least the next twelve months.”

    According to its third-quarter 2012 results, released October 5, 2012, the company boosted its available liquidity 22% from $8.5 million to more than $10.4 million, and its working capital by 61% from $6.3 million to $10.2 million as of August 31, 2012 compared with November 30, 2011. The increases reflect both unspecified LFB payments and in large measure, immediate cash proceeds of nearly $3.9 million, from Thallion selling Caprion Proteomics to an affiliate of private equity firm Chicago Growth Partners.

    That Caprion deal also allowed Thallion to record net earnings of more than $3.7 million or 12 cents a share in the third quarter of 2012, and net earnings of about $2.2 million or 7 cents ashare for the nine months ending August 31, 2012.

    Excluding that one-shot gain, Thallion finished Q3 2012 in the red, losing $711,782 or 2 cents a share in the third quarter, a slight improvement from the $870,583 or 3 cents-a-share net loss of Q3 2011. For the nine months ending Aug. 31, 2012, Thallion lost nearly $2.3 million or 7 cents a share, somewhat better than the third-quarter 2011 net loss of about $2.7 million or 8 cents a share.

    At the time, Thallion blamed the losses on reduced R&D spending (and thus LFB subsidies) due to completion of the core Phase II SHIGATEC clinical study in January 2012, as well as foreign currency fluctuations. In May 2012, Thallion trumpeted topline results showing that Shigamabs met its primary endpoint of safety and tolerability in a STEC-infected pediatric population.

    Collaboration and licensing revenues during Q3 2012 fell by more than half, to $234,743 from $772,335 a year earlier. For the nine months ending August 31, those revenues dropped by about half, to about $1.4 million from $2.6 million for Q1–3 2011.

    Caprion provides biomarker discovery and other proteomics services to biopharmas that as of last year included GlaxoSmithKline, Johnson & Johnson, and Merck & Co. Thallion also stood to receive within 15 months $583,000 held in escrow, plus unspecified additional cash if Caprion achieved undisclosed fiscal 2012 revenue and gross margin targets; no announcement had been made on whether those targets were met.

    By December 2012, however, Thallion delisted itself from the Toronto Stock Exchange, opting instead to list its shares on the TSX Venture Exchange. The decision came six months after TSX began a review of whether Thallion was meeting the exchange’s continued listing requirements.


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