CPEX drops Nasulin development

CPEX Pharmaceuticals has abandoned its attempt to develop Nasulin, a nasal insulin spray and one of the company’s key potential products when it was spun off from Bentley Pharmaceuticals in the summer of 2008.

The Exeter-based firm buried the news in a proxy attacking Richard Rofe — a large shareholder who has offered to buy the company and is running for a board seat.

The Nasulin announcement was included in a proxy for the shareholder vote on May 26, along with a separate, terse filing. Based on the company’s latest filings – which showed that Nasulin didn’t score any statistically significant results when compared to a placebo in testing – the company “decided not to proceed with any further Nasulin development activities and will seek to sell or out-license the program.”

Instead, the firm said it would concentrate on alternative delivery of other medications, such as Testim, a testosterone skin cream that accounts for all of the company’s revenue, and its new partnership with Allegan to develop Ser-120 for the treatment of nocturia, a condition involving the urge to urinate that disrupts sleep.

CPEX also said it would work at identifying other licensing possibilities and to develop other new compounds.

But it was development of Nasulin that attracted shareholder interest in the Bentley Pharmaceuticals spinoff, despite the fact that company posted net losses before and after it went public.

CPEX lost $6 million in two years, leaving $13.7 million in cash and equivalents at the end of 2009. The increased sales of Testim could not make up for the increasingly amount of money spent in research and development that went into Nasulin.

Rofe shook things up at the start of this year by buying 12.2 percent of the company and announcing that he intended to make a tender offer to buy the company for $14 a share at a time when it was trading for $11.25.

Rofe became increasingly critical of the company’s management, particularly the emphasis to develop Nasulin, along with a patent suit involving Testim and what he said was excessive compensation of management.

In an open letter to shareholders, the company criticized Rofe, noting that his companies and family sold off 60 percent of their total stake in CPEX, “resulting in a personal profit of $1,000,000 …. These significant stock sales were executed after Rofé made market-moving public comments about CPEX and his stated intention to commence a tender offer for the Company.”

The company said Rofe’s criticisms of the board and management are “untrue and do not merit addressing.”

Rofe, it added, hasn’t shown that he has the financing to buy the company and “furthermore has no prior experience working at any level at a life sciences company.”

Rofe called the criticisms “smoke and mirrors” to cover up the company’s admission of on Nasulin.

“They fought us until they could fight us no more because we were shining a light on bad results. What could they do?” Rofe said.

“Thankfully they listened to me” in abandoning Nasulin, Rofe told NHBR. “But they still want to entrust it to the same people who burned through $40 million for nothing. They never would have stopped that thing if it wasn’t for us.”

Next, he said, the company should not “find another product to spend that money on,” but either “return the money to the shareholders or sell the company to me,” Rofe said.

CPEX declined comment on Rofe’s response to its open letter. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW