By Lisa Seachrist

Washington Editor

In the wake of an FDA advisory panel's rejection of its lead drug candidate, Myotrophin, Cephalon Inc. saw its stock value plummet 35 percent Friday. The West Chester, Pa, company has yet to decide the fate of Myotrophin, which is designed to treat amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig's disease.

The FDA's Peripheral and Central Nervous System Drugs Advisory Committee voted 6-3 against recommending approval of Myotrophin (recombinant human insulin-like growth factor-1) on Thursday because the company failed to provide substantial evidence that the drug had any positive effect.

"Obviously, we are disappointed with the committee's recommendation," said Jason Rubin, vice president of corporate communications at Cephalon. "It's just too soon to say what the next steps will be."

Cephalon's stock (NASDAQ: CEPH) fell $7 Friday, closing at $13. Shares of Emeryville, Calif.-based Chiron Corp., which co-developed Myotrophin, dipped $0.875, ending the day at $19.

Last June, the same FDA advisory committee approved Myotrophin's treatment investigational new drug (IND) application in light of a North American study that showed the drug slowed progression of the disease by 26 percent and a European study of the drug that failed to show that the drug had any effect. At that meeting several committee members indicated that the best way to clear up the discrepancy would be to conduct an additional clinical trial.

Gamble Did Not Pay Off

Cephalon and Chiron took a gamble in submitting their new drug application (NDA) without that clinical trial. Instead, the companies presented data and analyses showing that patients receiving drug in the North American study had a 3 month survival benefit, and that patients with the highest blood levels of insulin-like growth factor-1 had the best outcome as well a providing animal data showing Myotrophin could preserve motor neurons.

The agency, however, countered that the additional analyses could only mimic the outcome of the North American trial, not provide any new information. The panel agreed and denied Myotrophin its recommendation despite heart wrenching testimony from ALS patients and their doctors. Currently, the only drug approved for ALS is Rilutek, which has been shown to add on average only 3 months of life for patients whose life span after diagnosis is three years.

"I think [Thursday's] decision was an indication that the agency will make its decisions based upon the data, not on politics," said Matthew Geller, an analyst with Oppenheimer & Co. in New York. "The moral of this whole thing is validation of data. FDA wants to see a proven product."

Frank Baldino, CEO and founder of Cephalon, told the panel that the company had already invested $130 million in clinical trials and was unlikely to conduct another expensive and lengthy clinical trial.

David A. Drachman, professor and chair of neurology at the University of Massachusetts Medical School in Worcester, asked why the company had not used the treatment IND as a means for conducting another trial. "It seems an ideal environment to gather the sort of information that we need to recommend this product," Drachman said.

William Graney, vice president of clinical operations for Cephalon, argued that it was too difficult to gather quality information given the lottery nature of the treatment IND. Myotrophin currently is available to 450 patients who are chosen to receive drug in a lottery conducted by the National Organization for Rare Disorders.

Robert Temple, director of the office of drug evaluation I for the FDA, pointed out that "the companies were not required to use the treatment IND to collect clinical information. However, they did miss an important opportunity."

Reijer Lenstra, an analyst with Smith Barney in New York, agreed Cephalon missed an opportunity to conduct a clinical investigation into survival.

"The companies presented complex data about physicians' and patients' assessments of progression of ALS that they admit could have cultural bias," Lenstra said. "There is no cultural bias for survival either you are alive or you aren't. That is the type of investigation that could easily be conducted using a treatment IND in a disease that kills people on average within three years of diagnosis."

Drug's FDA Approval Unlikely

Lenstra said the Myotrophin data has made him skeptical of the drug for quite some time and he thinks "the advisory panel absolutely made the right decision. The companies did not prove Myotrophin to be effective."

In addition, Lenstra pointed out that having an ineffective drug on the market could slow the development of effective treatments.

"I don't think Myotrophin has a snowball's chance in hell of being approved without another positive clinical trial," Lenstra said.

Tim Wilson, an analyst with UBS Securities in New York, however, issued a statement indicating that like the situation for AIDS drugs, the agency may not be willing to weather the political fallout of denying a drug to a patient community with few alternative therapies. In addition, Wilson noted that a post-market approval study of the combination of Rilutek and Myotrophin has been planned that could lend support to Myotrophin's clinical data.

Because Myotrophin is under fast-track review, the agency is expected to render its decision sometime this summer. Cephalon also has trials for Myotrophin in peripheral neuropathies. *