Regeneron Pharmaceuticals, Inc. announced that it plans to initiate a Phase IIb study of the company’s Interleukin-1 (IL-1) Trap for the treatment of rheumatoid arthritis (RA) in the second half of 2004 and that Novartis Pharma AG notified the company that it has decided to forgo its rights under the parties’ collaboration agreement to jointly develop and commercialize the IL-1 Trap.

Regeneron decided to conduct a Phase IIb study based on the recommendation of an advisory panel of independent medical experts. The panel examined the results from the Phase II trial of the IL-1 Trap in patients with RA which was completed in the second half of 2003. The panel concluded that the completed Phase II trial may not have tested the maximally efficacious dose of the IL-1 Trap and that a new Phase Ilb study should be conducted in a larger patient population, testing higher doses for a longer period of time. The Phase IIb trial is expected to begin in the second half of 2004 following completion of development of a new formulation and patient tolerability studies. In addition, Regeneron plans to conduct studies of the IL-1 Trap in a variety of other inflammatory diseases where Interleukin-1 is believed to play a critical role.

After evaluating the results of the Phase II study, Novartis informed Regeneron that as a condition for participating in the continued clinical development of the IL-1 Trap, it would require revisions to the terms of the original agreement applicable to the IL-1 Trap. Regeneron declined to accept revisions to the collaboration agreement on the terms proposed by Novartis, and Novartis has elected not to proceed with the joint development of the IL-1 Trap. Under the terms of the collaboration agreement, which began in March 2003, Novartis has to date paid $102 million to Regeneron in up-front payments, equity investments, and development expenses. Of that total, $13.7 million consists of a loan, which is forgivable when near-term milestones are met. Novartis also remains obligated to fund development expenses during the nine-month notice period following its decision. In addition, Regeneron and Novartis each retain rights under the agreement to elect to collaborate on the development and commercialization of other IL-1 antagonists being developed independently by the other party that are in earlier stages of development.

“We are moving the IL-1 Trap development program forward because we believe it is important to test higher doses in order to fully assess the therapeutic effect and commercial value of this product candidate in rheumatoid arthritis as well as other inflammatory diseases. While we were satisfied with the progress the partnership had made, we did not believe a renegotiation of our agreement on the terms proposed by Novartis was appropriate,” said Leonard Schleifer, Regeneron’s CEO. “We are confident in our decision to proceed with the IL-1 Trap program and believe that interleukin-1 blockade will find a role in the treatment of serious medical diseases."