Trubion Drug to be Co-developed

On Friday, Trubion Pharmaceuticals, Inc. (TRBN) agreed to jointly develop and commercialize TRU-016 globally with Facet Biotech Corp. (FACT).  TRU-016 is undergoing early-stage studies for chronic lymphocytic leukemia (CLL).
 
The deal requires Facet to make a $20 million upfront payment to Trubion coupled with an additional $176.5 million on the achievement of certain milestones. Further, Facet has agreed to buy 2.24 million shares of newly issued Trubion common stock for $10 million. The companies have agreed to contribute equally towards costs related to development, commercialization and promotional activities. All global operating profits will be shared equally.
 
The TRU-016 program is focused on the development of a novel CD37-targeted therapy for B-cell malignancies, such as Non-Hodgkin's lymphoma (NHL) and CLL. CD37 is a clinically validated target for the treatment of B-cell malignancies and TRU-016 has been designed for a desired therapeutic label surrounding B-cell depletion in these B-cell malignancies. The transaction includes the global rights to TRU-016 in all indications coupled with the rights to similar drugs in Trubion's pipeline.
 
According to the National Cancer Institute, CLL is estimated to affect 70,000 people in the United States. Approximately 10,000 new cases of CLL are diagnosed each year according to the American Cancer Society (ACS) which estimates that 15,110 new cases of CLL were diagnosed in the United States during 2008. Approximately 4,390 people died of CLL in the U.S. during 2008. In addition, according to the ACS, NHL accounts for about 4% of all cancers with approximately 63,000 new cases diagnosed each year.
 
We view the deal between Trubion and Facet as beneficial to both companies. It provides Trubion with the necessary liquidity to develop the drug. As far as Facet is concerned, it provides the company with the opportunity to build a robust oncology portfolio.
 
However, we are concerned about the tough competition awaiting TRU-016 from other B-cell depleting therapeutics. The therapies marketed for the treatment of NHL or CLL, or both, include Rituxan/Mabthera (Biogen Idec [BIIB - Analyst Report], and Roche [RHHBY]), Zevalin (Spectrum Pharmaceuticals [SPPI - Snapshot Report] and Bayer Schering AG [BAYRY - Analyst Report]), Bexxar  (GlaxoSmithKline plc [GSK - Analyst Report]) and Campath (Genzyme [GENZ]).
 
The deal with Facet caused a 45% jump in Trubion shares, closing Friday at $5.55.

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