A Clal Biotechnology subsidiary has taken a big step toward winning approval for its diabetes drug after the product did well in final Phase III clinical trials.

Clal Biotechnology, whose CEO is Reuven Krupik, holds an 84% stake in Andromeda Biotech, which is developing the drug, Diapep 277. Teva Pharmaceutical Industries holds the rest.

Diapep 277 is based on a synthetic peptide - a short protein - designed to control the autoimmune system of patients with Type 1 diabetes (formerly called juvenile diabetes. ) It would halt the destruction of pancreas cells that produce insulin, which regulates the blood's sugar levels.

The market is estimated in the hundreds of millions of dollars annually. Andromeda's success stands out given the failures in the past three years by Eli Lilly, Johnson & Johnson and GlaxoSmithKline in diabetes trials.

Novel approach

Andromeda's drug is the only one that targets the disease's development; the others provide an alternative to the body's production of insulin. In May 2011, the U.S. authorities granted Andromeda orphan drug status, which gives marketing exclusivity for the first seven years after a drug's launch.

Ten percent of the world's 280 million diabetes patients suffer from Type 1 diabetes, and every year 30,000 are diagnosed in the United States and 40,000 in Europe. UBS projects the market for the drug at around $4.5 billion in 2017.

Andromeda's drug met the trial's main goal - a statistically significant improvement in the pancreas' ability to secrete insulin in patients who were treated over a year. These patients did 23.4% better than those in the control group.

Andromeda also met the trial's secondary goals; the most important is the maintenance of the sugar balance in a patient's blood. In the trial, 56% of patients treated by Diapep 277 maintained their sugar balance, compared with 44% in the control group. These results are better than the interim numbers announced in November.

Also, the percentage of patients who required a lower dosage of insulin was higher in the treatment group than in the control group (62% vs. 49% ), and there were fewer unusual declines in blood sugar levels relative to the control group.

Patient enrollment

Over the next several weeks, Andromeda is expected to complete patient enrollment for the validation trial in the Phase III study, in which $189 million has been invested so far, mostly by Clal Biotechnology's predecessors. The validation trial is expected to last two years once enrollment ends; if the data support the results of the current study, Andromeda will apply for approval to the U.S. Food and Drug Administration.

According to a 2008 agreement between Teva and Clal Biotechnology, Andromeda has an option to force Teva to make up to three additional investments in Andromeda totaling $15 million.

It also has two options to sell Andromeda shares for $96 million to Teva, based on a valuation of $480 million, subject to receiving marketing approval for the European Union, and according to a valuation of $555 million subject to marketing approval in the United States.

Andromeda's latest success is expected to trigger a 3.9 million euro payment to German company Evotec, from which Andromeda bought the small molecule drug in 2007.