Just a month after alleging that clinical data had been falsified for the lead drug candidate it bought along with a biotech, scuttling its Phase III clinical program, Hyperion Therapeutics and the seller said today they agreed to step back from their legal wrangle, which has escalated into a $200 million lawsuit—at least for a month while attempting to resolve the dispute.

Under an agreement with seller Clal Biotechnology Industries, Hyperion agreed to complete, at its expense, the Phase III trial for the drug candidate, DiaPep277®. The experimental diabetes drug was acquired by Hyperion when it bought Andromeda Biotech from Clal Biotech in June for up-to-$570 million.

In return, Clal Biotech agreed to appoint, at its expense, “an independent party or parties” to evaluate whether there is any clinical efficacy to DiaPep277, the companies said in a statement. Hyperion agreed to furnish Clal Biotech with “relevant non-privileged documentary materials including, the statistical analysis plans, the study dataset after unblinding, and any correspondence with the FDA and other medical/clinical regulatory entities.”

Additionally, the companies said, the independent party or parties are expected to determine the ongoing conduct of the Phase III DIA-AID 2 study, the conduct of an earlier Phase III study called DIA-AID 1 study, the integrity of the studies' readouts, and whether there is a potential regulatory path for the compound that another drug developer may wish to pursue.

“Hyperion will not be obligated to take any action in response to the independent party's observations,” the companies said.

Until October 31—with a possible three-week extension should either company wish—Hyperion and Clal Biotech also agreed to not pursue “any lawsuit, claim, or other litigation” against the other related to DiaPep277, or the agreement by which Hyperion bought Share Purchase Agreement regarding Andromeda Biotech, Ltd. However, Hyperion and Clal Biotech also agreed that “neither party has waived any right, claim or defense relating to the agreement.”

DiaPep277 is a peptide derived from the human heat shock protein 60 that is designed to protect the internal production of insulin in patients newly diagnosed with type 1 diabetes. DiaPep277 works by stopping the immune destruction of insulin-producing beta-cells in the pancreas through stimulation of regulatory responses, without causing immunological suppression.

The DIA-AID 1 trial reported successful results for DiaPep277. But last month, Donald J. Santel, Hyperion’s president and CEO, said the trumpeted results left out data from 34 patients excluded in violation of study entry criteria. When their data was added back during a final primary efficacy analysis after the close of its acquisition of Andromeda, “the apparent treatment effect of DiaPep was lost,” Santel said during a conference call.

Citing the allegedly tainted results, Hyperion canceled its acquisition of Andromeda from Clal Biotech. Clal Biotech responded by suing Hyperion for $200 million, contending that the canceled sale “caused substantial damage” because most of the deal consisted of contingent payments. Hyperion had agreed to pay Clal Biotech $20 million cash upfront—$12.5 million in cash and nearly $7.85 million in stock—as well as up-to-$550 million in payments tied to milestones.

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