By Mary Welch

Staff Writer

Last September, Ophidian Pharmaceuticals Inc. received what usually is a kiss of death for a young biotech company: Its partner, Eli Lilly & Co., returned all rights to OPHD001, an avian polyclonal antibody for the treatment of Clostridium difficile-associated disease (CDAD).

"Our stockholders panicked, and didn't know what was wrong," recalled Donald Nevins, chief financial officer for the Madison, Wis., company. "They were afraid there was something fundamentally wrong with the science. [Indianapolis-based] Lilly just thought the patient population was too small for them. We knew there wasn't anything wrong, so we didn't mind Lilly's actions at all. In fact, we're about to enter Phase II in a few weeks."

It was the second time an Ophidian deal had fallen through. The 10-year-old company earlier had licensed an anti-venom drug to American Home Products Corp., of Madison, N.J., but nothing much happened. "It's sitting on the shelves somewhere," Nevins said.

But the company, with 31 employees, is forging ahead. Ophidian is in the process of leasing a 4,870-square-foot facility to house its pilot manufacturing plant to discover, develop and make drugs for gastrointestinal diseases. In addition to OPHD001, the company is developing OPHD002 for the treatment of inflammatory bowel disease (IBD).

OPHD001 has completed two Phase I trials and will start enrolling 160 diagnosed CDAD patients in up to 10 medical centers in the U.S. Three doses and the comparator drug, oral vancomycin, will be evaluated. The primary endpoint will be safety in patients, as well as time to resolution of intentional symptoms, severity of symptoms, disease recurrence and patient well-being.

CDAD is a disease that occurs in people who have been treated with oral antibiotics that destroy beneficial gut flora. Symptoms can range from diarrhea to death. About 400,000 cases occur annually in the U.S., with a total health care tab of about $1 billion a year. Ophidian's strategy is to deliver antibodies to the colon that neutralize the disease-causing toxins produced by C. difficile. These toxins play an essential role in the organism's disease mechanism.

The company's second compound, OPHD002, aimed at the long-term treatment or cure for IBD, should start Phase I trials early next year. Ophidian has developed high neutralizing potency antibodies to a well-established IBD cytokine, tumor necrosis factor (TNF). This orally delivered drug would be tested for the maintenance of Crohn's disease remission, as well as the management of acute disease flare-ups.

"Our research has taught us a lot about antibodies delivered orally," Nevins said. "We've found that the oral delivery of avian polyclonal antibodies can neutralize inflammatory cytokines and are highly effective in treating inflammatory intestinal diseases in animals." She said the market for OPHD002 is "much larger than for OPHD001."

Avian antibodies are generated in chickens and consist of antibodies the animals produce in response to vaccination. For complex targets, polyclonal antibodies are ideally suited as a drug form, because they can neutralize the target by binding to multiple target sites.

Ophidian uses antibodies that are extracted from the eggs of specially vaccinated hens. The hen is an inexpensive and efficient bioreactor, which converts about 25 percent of its daily nutritional mass into egg mass. Ophidian has proprietary production methods to extract these egg yolk antibodies to yield a dry and stable bulk drug substance, the company said. At least for now, it has a ready supply of hens. The company operates a research agricultural facility in southeastern Wisconsin.

Ophidian was founded in 1989 by two scientists at the University of Wisconsin at Madison, who came up with the anti-venom drug. Of the two, Sean Carroll is still involved with Ophidian. He is also currently a professor of molecular biology and genetics, and an investigator with the Howard Hughes Medical Institute.

Last year the company went public, raising just shy of $10 million. It is currently raising another $2 million from two investors.

"We want to go through our Phase II trials completely by ourselves and then partner," Nivens said. "That way, we can cut the best deal and realize shareholder value."

As the company approaches its first Phase II, Nivens looked back at the initial shaky beginnings of the company

"Do you know what the insiders are doing?" Nevins asked. "We're buying. We're buying more stock, because we know what's going on."

Ophidian's stock (NASDAQ:OPHD) closed Friday at $1.375, up $0.125.