Staff Writer

The FDA's Office of Oncology wants another Phase III trial of NeoPharm Inc.'s lead drug, cintredekin besudotox, before considering an application for its approval in the treatment of recurrent glioblastoma multiforme (GBM).

The decision is not entirely surprising, considering the drug failed to meet its primary endpoint in a Phase III trial last December. Even so, the news sent NeoPharm's shares (NASDAQ:NEOL) down about 20 percent on Thursday before they recovered to close at $1.67, still down 20 cents, or 10.7 percent.

Executives from the Waukegan, Ill.-based company did not return calls seeking comment. In a news release, NeoPharm said it is "disappointed with the Office of Oncology's position" and will now "consider its options to determine the best path forward."

One of those options may be to press ahead with the second Phase III for cintredekin besudotox, as the FDA requested. NeoPharm said the agency encouraged a dialogue regarding the pathway forward. Additionally, the Phase III data provided a glimmer of hope: even though the trial did not achieve its primary endpoint of a statistically significant survival difference compared to Gliadel Wafer (polifeprosan 20 with carmustine implant, MGI Pharma Inc.), cintredekin besudotox did demonstrate a larger survival difference about half-way through the trial. (See BioWorld Today, Dec. 12, 2006.)

Gliadel Wafer is the standard of care in GBM. Cintredekin besudotox is a fusion protein comprised of interleukin-13 and pseudomonas exotoxin A. Japanese rights already have been partnered to Nippon Kayaku Co. Ltd. (See BioWorld Today, Jan. 6, 2005.)

Another option may be to look at alternate means of delivering the drug. Cintredekin besudotox delivered via "convection-enhanced delivery" followed by external beam radiation therapy proved to be safe and well-tolerated in a Phase I trial. And a Phase I/II trial showed improved survival in a subgroup of patients receiving two or more optimally placed catheters.

On the other hand, NeoPharm could decide to scrap cintredekin besudotox altogether and fall back on its Phase II pipeline. LE-SN38, a liposomal formulation of the active metabolite of irinotecan, is in a Phase II metastatic colorectal cancer trial with an interim analysis due next quarter. NeoPharm is in ongoing discussions with the FDA concerning a regulatory path - potentially under 505(b)(2) - for LEP-ETU, a liposomal formulation of paclitaxel.

Given the dip in NeoPharm's stock price on top of the 68 percent drop that followed the Phase III results, raising money is probably not the company's first choice right now. Fortunately, NeoPharm had $38.6 million in cash at the end of the year - enough to carry it into 2008.

Two restructuring efforts this year have helped stretch that cash. In April 2006, the company reduced its work force by approximately 23 percent, consolidated operations and "reprioritized" its NeoLipid (LEP-ETU) program, all of which were projected to reduce total expenses by about $7 million on an annualized basis. The chief scientific officer, Imran Ahmad, and chief financial officer, Lawrence Kenyon, departed soon after. Then in December 2006, less than two weeks after announcing the Phase III failure, NeoPharm laid off another 20 percent of its work force in anticipation of $1.5 million in additional cost savings for 2007. (See BioWorld Today, May 2, 2006.)

For the fourth quarter ended Dec. 31, NeoPharm reported a net loss of $7.7 million, 20 percent less than the in the fourth quarter of 2005. While some of that savings can be attributed to the restructuring, some also resulted from completion of enrollment in the Phase III cintredekin besudotox trial. The company reported a net loss of $33.2 million for the full year, compared to $38.7 million in 2005.

The decision regarding which options to pursue falls on the board of directors, including new President and CEO Laurence Birch. Birch joined the company earlier this week from Ohio Medical Corp. and is the fourth full-time CEO to head the company in the past three years.