Tech Confidential often covers biopharmaceutical license deals — also known as collaborations, partnerships or arrangements — that come together with much fanfare and promises of multimillion-dollar payments that, in fact, will likely never come to pass. Such deals are the lifeblood of small biotechs that can afford to develop a drug only so far and then sell the rights to bigger companies for much-needed cash. If a drug fails, those arrangements can fall apart quickly.

In an unusual double-whammy, biotech firm Metabasis Therapeutics Inc. revealed Tuesday that its experimental hepatitis B treatment pradefovir showed an increase of cancer in rodents. What happens in rodents doesn't always translate to humans, but the results were scary enough for Schering-Plough Corp. to drop the drug like, well, a squirming rat. After paying $21 million just last December for the worldwide rights to pradefovir, Schering decided to cut its losses before it started testing the drug on humans. If the drug had come to market, Schering would have plowed $90 million in additional fees to Metabasis and Valeant Pharmaceuticals, which originally licensed the rights from Metabasis back in 2000. The rights now revert to Metabasis. Investors will surely be watching to see if the company can wring any more value from the disappointing drug, or whether it's time to move on.

Metabasis' hometown paper the San Diego Union-Tribune reported Wednesday that the firm's second clinical setback involved its Type 2 diabetes drug, CS917.  Three months into Phase 2 trials, it wasn't lowering blood sugar levels enough. So far, however, development partner Daiichi Sankyo Co. Ltd., which is in charge of development, hasn't jumped ship. One possible reason is that the results gave the partners some wiggle room, and they say they'll continue to analyze the data. "We have many unanswered questions," Metabasis' chief scientific officer said.  —Alex Lash

See story from San Diego Union-Tribune
See story from The Wall Street Journal

Tags: Biotech, pharmaceutical, healthcare, medicine