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Now to the Trenches -- Bristol and Ivax Duke It Out Over Taxol

Friday's thumbs-up from a

Food and Drug Administration

committee was the easy part for

Ivax

(IVX)

and

NaPro

(NPRO)

.

Now, the companies have to enter the labyrinthine back channels of the agency to duke it out with

Bristol-Myers Squibb

(BMY) - Get Bristol-Myers Squibb Company Report

, which is trying desperately to protect its billion-dollar cancer drug,

Taxol

, from the impending threat of the Ivax-NaPro drug.

Tomb Raider's

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Lara

contends with foes far less challenging.

The bizarre story so far: NaPro developed its own method for extracting, isolating and purifying the active ingredient in Taxol, called paclitaxel, from ornamental yew trees. Ivax, the beleaguered Miami generic pill giant, signed a deal to license the drug, called

Paxene

, and will pay NaPro a royalty. The two intrepid companies filed with the FDA in April for approval of Paxene to treat Kaposi's sarcoma (KS), a rare cancer that often afflicts AIDS patients.

The KS market, however, is minuscule and shrinking, thanks to effective AIDS treatments. So the not-so-secret plan was to get Paxene on the market via KS, but then to have sales off-label in other cancers like breast and ovarian, giving the drug the huge potential of Taxol.

But Bristol had a plan of its own: to file with the FDA for approval for Taxol for KS, which it did quietly and without notice in February. The action, according to analysts, took Ivax by surprise when it later learned of the filing. BMS not only got approval (publicly announced) just this August, but also got the enviable "orphan drug status." Such status grants a seven-year period of exclusivity to a company that develops a drug for a disease with fewer than 200,000 sufferers in the U.S., an attempt to spur development in otherwise neglected areas.

That means Bristol manages to get a period of exclusivity for a tiny population for a drug that already sells over a billion dollars worth worldwide. This approval has baffled observers, especially since there are already drugs on the market for KS, including one with orphan drug status,

NeXstar Pharmaceuticals'

(NXTR)

Daunoxome. "Does it make sense to have more than one drug" with orphan drug status? asks Michael Hart, chief financial officer of NeXstar, giving voice to a common sentiment. "I don't know. It seems odd to me."

Odd, for sure, and possibly bad news for Ivax and NaPro if they can't distinguish their drug from Taxol. As it stands now, the committee recommended Friday that the agency approve their Paxene for KS, but if BMS has broad exclusivity, then Ivax and NaPro might be shut out.

And what else could make BMS happier? Taxol has had zero impact on the KS market, say companies that sell drugs for the disease. Analysts say the only reason BMS applied for the KS approval is to protect Taxol's larger markets.

"We are confident that the FDA will honor the orphan drug approval," says Jane Kramer, director of public policy at Bristol. Translation: We shall fight them on the beaches. We shall fight them on the landing grounds...

Ivax will argue to the FDA that Paxene is different in some way from Taxol, offering advantages in safety or efficacy. But that's not all, hints Phil Frost, chairman and chief executive: "There are other ways in which a sponsor can avoid

a competitor's exclusivity." Frost declined to elaborate or comment on the timing of the agency's decision.

If Ivax and NaPro get in, it could be big. Taxol is expected to do $900 million just in the U.S. this year. "It could be very significant. The issue is whether they get it or not," says Dan Lewis, an analyst for

Gerard Klauer Mattison

. "It's just beginning. There wasn't much question whether it was approvable." Gerard Klauer Mattison does not have an investment banking relationship with Ivax and NaPro.

Craig Henderson, chief executive of

Sequus

(SEQU)

, which sells a KS drug called Doxil, says, "If they bring

Paxene in at a lower price, it'll go like hot cakes."

In fact, shares of NaPro and Ivax rose last week in anticipation of the news and the panel's OK. NaPro was up 13% for the week before slipping 11% to 9 9/16 on Monday. Ivax, which has been beaten down because of corporate restructuring and heavy losses in the competitive generic arena, gained 23% to 10 7/8 last week before giving back 4% to 11 on Monday. Bristol was flat for the week, untouched by the threat.

Taxol itself has an odd history. The drug, which isn't patented, was co-developed by the

National Cancer Institute

and Bristol. Under the terms of their licensing agreement in 1992, BMS was granted exclusivity until the end of this year. The company could "conceivably" face generic competition after that period expires, says Bristol's Kramer. However, BMS won patents on a unique dosing form for breast and ovarian cancer, which should extend the protection on the drug in those areas.

Ivax's next tack will be to attack on that front. It has finished trials of Paxene in breast and ovarian cancer, according to CEO Frost. Frost wouldn't comment on the filing status of Paxene in those indications.

But Gerard Klauer's Lewis, who rates Ivax a hold, believes that the generic drug company has longer odds on Plan B. "Basically, if they don't get KS, it'll be very difficult to get breast and ovarian. The best chance Ivax has is to get KS right now."