Sanofi dumps KaloBios' antibiotic in another stinging setback

KaloBios ($KBIO) was an early entrant in 2013's boom of biotech IPOs, touting its development technology as a springboard for high-quality antibodies. A year later, that promise hasn't come to fruition, and partner Sanofi ($SNY) is walking away from an antibacterial program for which the company had high hopes.

Sanofi is handing back full rights to KB001-A, a monoclonal antibody that targets Pseudomonas aeruginosa (Pa), a bacterium implicated in pneumonia and lung infections tied to cystic fibrosis. KaloBios isn't saying what led Sanofi to abandon the treatment, which is in the midst of a Phase II study, but the company wasted no time in pointing out that it is free to find another partner and will immediately embark on a search to do so.

KaloBios' shares, already pilloried by past clinical troubles, dropped as much as 22% to about $1.50 on Monday, down more than 75% from their $8 debut last year. Sanofi is tossing a deal in which it paid $35 million to partner with KaloBios and promised up to $255 million in milestones.

David Pritchard

But CEO David Pritchard remains undeterred, pointing to promising signs for KB001-A and expressing optimism that KaloBios can strike another deal to get its anti-infective into Phase III.

The biotech is plowing ahead with its Phase II program, recently wrapping enrollment on a planned 180-patient study designed to test KB001-A's benefits in cystic fibrosis sufferers with Pa-related lung infections. The plan is to release top-line data from that study in 2015. Separately, KB001-A came through in a Sanofi-helmed Phase I/II study on 35 patients with ventilator-associated pneumonia, the company said, leading the FDA to grant its fast-track status to the drug.

"We continue to believe in the potential of this innovative therapy as a means to address Pa infections in a variety of settings," Pritchard said in a statement. "This negotiated termination not only provides us with full unencumbered rights to our cystic fibrosis indication, but will enable us to seek a partner with established capabilities in additional indications as well as in territories outside of the United States."

The setback comes just months after KaloBios halted development on another of its patented antibodies--KB003 for severe asthma--when the treatment missed its primary efficacy endpoint in a Phase II trial. The biotech has said it's looking over the data to determine next steps, if any, for KB003.

KaloBios' final clinical asset is KB004, an antibody to the EphA3 gene designed to fight hematologic malignancies and solid tumors. That treatment is in the extension stage of a Phase I/II trial.

- read the statement

Special Report: 2009 Fierce 15 - KaloBios