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Update: Napo Pharmaceuticals, Inc. Files Suit Against Salix Pharmaceuticals, Ltd. (SLXP) for Breach of Contract Pertaining to Lead Drug Candidate

5/6/2011 2:04:16 PM

By Suvarna Sheth,

May 9, 2011 -- SAN FRANCISCO –- Napo Pharmaceuticals filed a lawsuit against Salix Pharmaceuticals in the state of New York on May 5, 2011, according to an undisclosed source. The lawsuit arises from Salix’s alleged fraudulent conduct and breaches of its contract relating to one of Napo’s primary pharmaceutical products, crofelemer.

Crofelemer is Napo’s propriety gastrointestinal compound still under development for four different indications: CRO-IBS for diarrhea-Predominant IBS (phase 2), CRO-HIV for AIDS-related diarrhea (phase 3), CRO-ID for acute infectious diarrhea (phase 2), and CRO-PED for pediatric diarrhea, (phase1).

Napo and Salix entered into an agreement for the license of crofelemer by Napo to Salix for all human indications of the drug in North America, Europe and Japan and for certain indications worldwide on December 9, 2008. According to the agreement, Salix was obligated to develop, manufacture and commercialize crofelemer for respective indications within areas licensed to it by Napo.

According to the court ordered summons, despite FDA “fast track status” NDA filing of the drug approaching in June 2011, Salix has failed to develop, manufacture and commercialize crofelemer for CRO-HIV for AIDS-related diarrhea.

Napo is claiming damages exceeding $150 million and seeks a declaratory judgment entitling Napo to terminate the collaboration agreement with Salix.

Based on a statement released from Salix Pharma today, Napo’s claims are "without merit and the lawsuit is baseless." The press release states that Salix intends to defend against the lawsuit and plans to continue with the development and commercialization of crofelemer in accordance with its past guidance and the terms of its Collaboration Agreement with Napo.

Napo Pharmaceuticals is based in San Francisco, Calif., and Salix Pharmaceuticals is based in North Carolina. Representatives for both companies have yet to return calls to BioSpace regarding this matter.

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