After 12 months of fraud accusations, legal threats and stock price swings, Clal Biotechnology (TLV:CBI) and Hyperion Therapeutics now have data from the heavily scrutinized Phase III trial of the diabetes drug at the center of their spat. The trial was a flop, Globes reports.
The outcome cuts the likelihood Clal will take up its option to reacquire the diabetes drug and the rest of Andromeda Biotech--and sent its stock down 20%. Clal gained the option in February as part of the truce it negotiated with Hyperion. Clal sold Andromeda to Hyperion in a back-loaded $570 million (€509 million) deal in April 2014, only for the situation to turn sour 5 months later. Hyperion accused Andromeda of working with an Israeli biostatistics firm to tamper with the trial data, leading it to conclude that it had bought a worthless asset.
Clal will now decide whether Andromeda is worth the $3.5 million upfront fee it must pay to buy back the controversial company, a process that will entail digging through the data in search of reasons to continue development. If Clal takes up the option, it must also commit to up to $36.5 million in milestones. Just 17 months ago, Hyperion thought Andromeda was worth $20 million upfront and $550 million in milestones. If Clal decides the knock-down rate is too much to pay for the Phase III flop, rights to the drug will revert back to Yeda Research and Development Company.
The transfer to Yeda would bring the drug, DiaPep277, back to where it started. Professor Irun Cohen discovered the drug while working at the Weizmann Institute of Science, which then passed it on to the industry through its tech transfer company, Yeda. The drug bounced around the Israeli biotech sector, during which time Teva ($TEVA) bankrolled development, before Clal reacquired it through Andromeda and flipped it to Hyperion. At the time Hyperion CEO Donald Stansel touted the deal as a "transformative event."