The head-to-head court battle between Xoma Corp. and Centocor Inc. over drugs to treat gram-negative sepsis has aroused impassioned argument among Wall Street analysts.

As information about clinical trials of Xoma's E5 and Centocor's Centoxin has trickled out of the patent infringement trial brought by Xoma against Centocor, several analysts have changed their ratings on the companies.

Xoma stock (NASDAQ:XOMA) closed down 88 cents at $22.88 on Thursday and Centocor stock (NASDAQ:CNTO) rose $1.75 to $36 after analysts, including Robert Kupor of Kidder, Peabody and Linda Miller of PaineWebber, raised their ratings on Centocor.

Kupor issued a "buy" rating on Centocor after Xoma testified on Wednesday that E5 didn't reduce overall mortality in its second Phase III clinical trial.

"We've had this almost cataclysmic disclosure that E5 didn't work in the second trial, as it didn't in the first," said Kupor. "So it's very likely Centocor can get a monopoly on monoclonals for septicemia."

Kupor said that Centocor has already taken most of its lumps because Xoma is winding up its case. Centocor will get to tell its side of the story next.

Jim McCamant, editor of the Medical Technology Stock Letter in Berkeley, Calif., disagreed. "These analysts are totally misunderstanding what's happening," he said. "Xoma has two studies that show marginal efficacy, while Centocor has only one study that shows marginal efficacy."

McCamant said other analysts are ignoring what he considers Centocor's badly flawed trials. "Xoma brought in a statistician who ripped apart Centocor's study," he said, lowering the significance of Centocor's mortality data.

"Based on the data available, E5 has a better chance to get FDA approval than Centoxin does," he said.

Other analysts are more cautious. "It's a mess," said Denise Gilbert of Smith Barney in San Francisco. "There's no way I can come to an educated decision on who has a better product. I'm keeping my 'hold' on both stocks until after the advisory committee meeting." The Food and Drug Administration panel is scheduled to meet Sept. 4.

"If I had to make a guess now, I'd say Xoma could get a claim on prevention of organ failure and Centocor would get a mortality claim on (toxic) shock," she added.

And what about the actual subject of the trial, Centocor's alleged infringement of Xoma's patent?

"If Xoma loses the patent trial, it's a non-event," said Gilbert, who expects the FDA committee to rule before the trial ends. If Xoma wins, that would be critical because Centoxin sales would be blocked even with FDA approval.

-- Karen Bernstein BioWorld Staff

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