Shares of NeoPharm Inc. fell nearly 9 percent Thursday after the company announced the collapse of its agreement to develop cancer drugs with drug giant Pharmacia Corp.
The tussle involves an agreement the two signed in 1999 that called for the larger Pharmacia to help develop two drugs NeoPharm believed were promising in treating various cancers.
On Thursday, NeoPharm said it was terminating the pact. NeoPharm has accused Pharmacia of breaching the licensing agreement, saying the New Jersey-based company held up the development of the cancer compounds. An arbitration hearing is set for June.
“We are of the opinion that Pharmacia has not used commercially reasonable efforts to develop either product and therefore we filed for arbitration and are seeking damages,” said NeoPharm Chief Financial Officer Larry Kenyon.
Pharmacia denied the allegations and says it hasn’t terminated the licensing agreement. “On our end, we feel we have lived up to all of our obligations under the contract,” said Pharmacia spokesman Mark Krajnak.
The escalating rift sent NeoPharm’s shares down 8.5 percent, or $1.28, to close at $13.69 Thursday. Shares of Pharmacia slipped less than 1 percent, or 19 cents, to close at $44.50.
Biotech firms like NeoPharm need the resources and expertise of large pharmaceutical companies to bring their drugs from the lab through the regulatory process to market. Pharmacia has agreed to be bought by Pfizer Inc. of New York, the world’s largest drugmaker.
The two cancer compounds at issue in the dispute were entering final-stage human trials, NeoPharm said. It remains unclear when the drugs will be submitted for regulatory approval and might reach patients.
NeoPharm said the end of its pact with Pharmacia doesn’t negatively impact its future drug development. It will proceed to develop the cancer drugs on its own as well as other compounds in its pipeline. “We have a strong cash position,” Kenyon said.
