Cytogen contract dispute with CytoRad escalates

Cytogen's buy-out offer is rebuffed

A contractual dispute between targeted radiopharmaceutical developerCytogen and a sister company, CytoRad, intensified last month.The two companies are feuding over CytoRad's funding of R&Dperformed by Cytogen on several products.

CytoRad was formed as a separate company to fund developmentof Cytogen's prostate and bladder cancer products, as well asan ovarian cancer radiotherapy product. CytoRad licenses rightsto the products in exchange for cash milestone payments. Bothcompanies are based in Princeton, NJ.

In March, however, CytoRad announced that it "is exploringmodifications to its existing business relationship with Cytogen"(SCAN 4/20/94). CytoRad also declined to commit funds for productdevelopment work for 1994.

CytoRad claimed that Cytogen failed to provide it with sufficientdata for the products it licensed from Cytogen, in breach of thecontract between the two firms. Cytogen, in turn, has chargedCytoRad with violating the contract by not committing funds thisyear to product development.

An effort by Cytogen to defuse the situation by buying outCytoRad in a stock swap was rejected by CytoRad, which said theproposal "did not even provide a basis for negotiations."Cytogen offered to purchase CytoRad by acquiring all CytoRad'soutstanding common stock "at a ratio that would have representeda premium compared to recent market prices of CytoRad's commonstock," according to Cytogen.

Cytogen would like to resolve the dispute without resortingto litigation, which would be a drain on the company at a crucialtime in its effort to improve prospects for its OncoScint monoclonalantibody imaging agent. Cytogen announced in April that slow salesof OncoScint have prompted the company to search for a new marketingpartner to replace Knoll Pharmaceutical.

Cytogen said that the discord will not affect the developmentof the products covered by the agreement with CytoRad. One ofthe products, OncoScint Prostate, has completed clinical trialsand Cytogen will file for Food and Drug Administration approvalin the second half of this year. Cytogen reduced its emphasison speedy development of the therapy products, OncoRad Ovarianand OncoRad Prostate, as part of a shift in corporate focus lastyear (SCAN 10/6/93).

Cytogen has said that it will fund product development itselfif CytoRad will not agree to do so. In the meantime, Cytogen willcontinue to negotiate with CytoRad to solve the dispute on "afair, equitable and efficient basis," according to Cytogenpresident and CEO Dr. Thomas J. McKearn.