Lilly And Investors Spin Out Xigris To Form New Critical Care Company BioCritica

Initial focus of the private biotech will be on continued development and commercialization of Xigris for sepsis; investment backers are NovaQuest Capital and Care Capital.

Eli Lilly & Co. and its troubled sepsis drug Xigris (drotrecogin alfa) have traveled a long, bumpy road together, but the two are finally parting ways - at least in the U.S.

Lilly is handing U.S. development and commercial rights to Xigris to private investors Care Capital and NovaQuest Capital, which have formed BioCritica Inc., a private biotech with a focus on hospital-based critical care drugs. The companies announced the spin-out May 23.

BioCritica, a startup based in Indianapolis, is focusing initially on the continued development and commercialization of Xigris, while eventually creating a portfolio of critical care medicines. The new company has the option to in-license other critical care compounds in preclinical development at Lilly and also to acquire ex-U.S. rights to Xigris. In exchange, Lilly will receive royalties on U.S. sales of the drug and an equity stake in BioCritica. The financial terms of the agreement were not disclosed.

The decision to shed Xigris reflects Lilly's effort to focus development resources, according to the company. Though Xigris has been available commercially since 2001, its sales have not met Lilly's or Wall Street's expectations.

BioCritica will continue Lilly's work on identification of the best uses of the controversial treatment, which has serious bleeding side effects and questionable efficacy in the broad sepsis patient population. "The development resources are very competitive," Lilly said. "We think Xigris will have access to more resources at BioCritica than it would if it stayed within Lilly."

Most notably, an ongoing Phase III study, PROWESS-SHOCK, is underway to determine if Xigris significantly reduces mortality in patients with septic shock compared to placebo, a study that was initiated at the request of the European Medicines Agency, to further explore the drug's safety and efficacy post-marketing. In Europe, the drug is approved for "exceptional circumstances," which means it is evaluated on an annual basis ('Lilly Will Conduct Additional Xigris Trial For EMEA,' 'The Pink Sheet' DAILY, Feb. 27, 2007).

Xigris: A Potential Blockbuster Gone Bad

Xigris, a recombinant form of human activated protein C, has long been a thorn in Lilly's side, considered one of the industry's most famous pharmaceutical flops. The drug was approved in the U.S. in 2001 for the treatment of adult patients with severe sepsis at high risk of death, a widespread and serious unmet medical condition. Thus, it was expected to be a blockbuster, with some analysts predicting peak sales of over $3 billion. But those sales never materialized, mainly because the drug has been tainted by side effects like uncontrolled bleeding. In 2010, U.S. sales of the drug were just $57.3 million and worldwide they were $104 million.

Lilly sells the drug through a contract-sales organization. The company has only one other marketed critical care product Reopro (abciximab), a glycoprotein IIb/IIIa receptor inhibitor, approved for the prevention of cardiac ischemic complications in patients undergoing percutaneous coronary intervention. No other critical care products are in the clinical-stage pipeline, though several are in preclinical development.

BioCritica has not disclosed its plans for Xigris. Neither its management or investors returned calls for comment. But many industry observers have long argued the drug belongs in the hands of a specialist biotech that can focus the drug in niche, better-characterized conditions rather than a broad indication like sepsis. Identifying a biomarker to identify patients that best respond to treatment could also help drive sales of the brand. Indeed, Lilly already decided a biotech was best suited for the follow-up to Xigris, a compound Lilly out-licensed to Cardiome Pharma Corp. in 2007 ('Son-Of-Xigris Goes To Biotech - Where It Belongs?' IN VIVO, June 2007).

BioCritica will be led by CEO David Broecker, who most recently served at the helm of the Cambridge, Mass. biotech Alkermes, Inc., but previously worked at Lilly in marketing and product planning. Broecker joined Alkermes in 2001 and was responsible for building the commercial infrastructure to market Vivitrol for alcoholism, which has failed to take off (Also see "Alkermes Exec Shakeup: CEO Quits, Replaced By Board Chair Richard Pops" - Pink Sheet, 11 Sep, 2009.).

NovaQuest is no stranger to striking risky deals with Lilly. In 2008, NovaQuest - then the partnering group of Quintiles Translational - made a big investment in Lilly's investigational Alzheimer's disease drug semagacestat, which failed in Phase III in August. In the aftermath, NovaQuest separated from Quintiles and is operating as an independent standalone biopharma investment firm. In a November filing, the firm revealed it had raised the first $117 million of a planned $500 million investment fund (Also see "Financings Of The Fortnight: More IPOs But More Haircuts As Well" - Pink Sheet, 3 Dec, 2010.).

-Jessica Merrill ([email protected])