West Coast Editor

Threshold Pharmaceuticals Inc.'s stock took a walloping after news that the FDA had put the Phase II program with TH-070 (lonidamine) for benign prostatic hypoplasia on partial clinical hold because of liver enzyme abnormalities, and Threshold stopped dosing in the European Phase III trial, as well.

The company's shares (NASDAQ:THLD) lost 75.4 percent of their value, closing Friday at $3.44, down $10.56.

The abnormalities include three serious adverse events observed after three months of dosing in the Phase III European/Canadian trial and three more cases of elevated liver enzymes that occurred in other ongoing trials.

"Obviously, this is a disappointment and, given the human safety data previously published for this drug, a surprise," Harold Selick, CEO of Redwood City, Calif.-based Threshold, told investors during a conference call.

TH-070, an indazole-3-carboxylic acid, is believed to disrupt energy metabolism by interfering with glycolysis, a production process for glandular prostate epithelial cells, which overgrow in BPH. The compound's active ingredient, lonidamine, was approved in many European countries in the mid-1980s for cancer, noted Alan Colowick, chief medical officer for Threshold - and the drug is given at much higher doses for that indication.

The literature regarding lonidamine against cancer includes about 80 studies, of which about 20 are controlled clinical trials, and none show evidence of statistically significant liver toxicity, he said.

"In some studies, the liver toxicity was higher numerically, but certainly nothing unlike some of the other side effects, which clearly demonstrated statistical significance," Colowick said.

Among the three patients with enzyme abnormalities in the Phase III trial, one arrived at the hospital with acute alcohol intoxication, elevated liver enzymes and bilirubin, and jaundice, but the other two had no conditions that might have led to trouble.

Overseas, lonidamine has been dosed for cancer at 450 mg to 950 mg per day for many months, and sometimes for years. The European Phase III in BPH trial randomized patients to three dosing arms (placebo, 50 mg or 150 mg daily). In the U.S., the Phase II trial randomized patients to five dosing arms (placebo, 5 mg, 25 mg, 50 mg or 150 mg daily).

As of late Thursday, the company had not yet received a letter from the FDA, but Colowick said determining the balance of safe dose and duration will be the main effort.

"We believe, and I think the FDA agrees, that plan would look something like a shorter duration certainly than has been used in the current Euro study," he said, and Threshold will respond to the FDA's letter with the available data set from ongoing clinical programs, as well as previous studies.

Meanwhile, "we feel we've taken the appropriate steps to protect patient safety - it was our decision to halt active dosing in the European Phase III study," Colowick said. "We think that's the prudent course of action, currently," and Threshold will focus next on assembling data from more than 700 patients in the U.S. and Europe who've gotten the drug for up to 28 days.

In research reports Friday, analysts used words such as "shocked" and "perplexing" to describe their reactions to the liver toxicities.

Joshua Schimmer, with SG Cowen in New York, wrote that "chances of successful commercialization for TH-070 are now extremely low," and removed the compound from his model for Threshold, downgrading the stock to "neutral." Schimmer added that he lacked "sufficient conviction" in the company's Phase III program with glufosfamide for pancreatic cancer to recommend buying the stock.

Christopher Raymond, with Robert Baird & Co. in Chicago, reiterated his "neutral" rating and predicted the launch of TH-070 would be delayed a year, from 2008 to 2009, and Raymond reduced sales estimates from $119 million to $60 million in 2009, and from $249 million to $145 million in 2010.

Still, the science behind TH-070 against BPH is sound, Raymond said, pointing to Phase II data showing "an improvement in symptoms that appear superior to any single agent approved in BPH today, and comparable even to combination therapies, which have a much more significant side effect profile than TH-070 appears to have."

The two market leaders in BPH are the alpha adrenergic receptor blocker Flomax (tamsulosin) from Boehringer Ingelheim GmbH, of Ingelheim, Germany, which sells more than $1 billion per year, and the 5-alpha reductase inhibitor Proscar (finasteride), from Merck & Co. Inc., of Whitehouse Station, N.J., which sells more than $600 million annually, although both carry side effects that lead some patients to prefer surgery.

Joel Sendek, at Lazard Capital in New York, downgraded Threshold from "buy" to "hold," and wrote in a report that he expects "safety concerns to outweigh possible positive efficacy results from the upcoming Phase II and Phase III trial results, reducing the likelihood of approval and market potential if approved." CIBC World Markets, also in New York, reduced the stock rating from "outperform" to "sector perform."

Threshold had been regarded as enjoying a leg up on Lilly ICOS LLC, the joint venture between Bothell, Wash.-based ICOS Corp. and Indianapolis-based Eli Lilly and Co., which is trying tadalafil, the active ingredient in the erectile-dysfunction drug Cialis, against BPH. A Phase III trial was expected to start this year, but ICOS said in its fourth-quarter earnings report that the FDA wants another Phase IIb dose-ranging study first.

Now, Threshold also is held back, at least temporarily, from a market that Raymond described as "huge," with almost all men older than 70 experiencing some BPH symptoms. An estimated 6 million in the U.S. and Europe could benefit from treatment.