Shares of South San Francisco-based Hana Biosciences Inc. (NASDAQ:HNAB) fell 35.2 percent Friday, or $1.31, to close at $2.41 after the company announced several setbacks in its late-stage pipeline of cancer drugs.

Chief among those was the withdrawal of a new drug application filing with the FDA concerning Zensana (ondansetron HCI), an oral spray to prevent nausea and vomiting associated with chemotherapy, radiation and surgery. Hana originally filed for approval under Section 505 (b)(2) in late June 2006 and was hoping for a decision next month. But in February, the company reported a precipitation issue in manufacturing and warned that the approval might be delayed. (See BioWorld Today, July 5, 2006.)

On Friday, Hana President and CEO Mark Ahn said in a conference call that the company had "ruled out the feasibility of options that would make this an easy fix" and had decided to stop development of the formulation. Partner NovaDel Pharma Inc., of Flemington, N.J., from which Hana acquired U.S. and Canadian rights in 2004, has developed an alternative formulation of the drug that is now under active investigation and scale-up. Ahn said the company will "know in about three to six months our go-forward position."

A more unexpected setback came in Hana's Marqibo (vincristine sulfate liposomes injection) program. Late last year, the company had requested a special protocol assessment from the FDA regarding the first of two Phase II, open-label, potentially pivotal trials of the drug in acute lymphocytic leukemia (ALL). Last week, the company received a letter from the FDA stating that the Office of Oncology Drug Products recently implemented a policy restricting SPAs to randomized trials.

Hana's senior vice president and chief medical officer, Gregory Berk, said the company was "surprised" by the letter and is "hoping to get some clarification on this." In the meantime, the Phase II ALL trial is set to begin within the month. Hana also plans to initiate a Phase III randomized trial comparing Marqibo to vincristine in elderly patients with ALL this year, and later will pursue a randomized pivotal trial in first-line non-Hodgkin's lymphoma.

Hana acquired Marqibo about a year ago from Inex Pharmaceuticals Corp., of Burnaby, British Columbia, after the product received an unfavorable FDA panel recommendation and a non-approvable letter. Although Hana officials seemed to remain confident in the product, analysts had plenty of questions regarding the company's decision to conduct a single Phase II trial rather than the two trials previously planned, as well as whether Marqibo could get approval based on a Phase II trial without an SPA. (See BioWorld Today, March 20, 2006.)

"We'll have to take the results of the Phase II trial and discuss them with the FDA and go from there," Ahn said.

Finally, the company announced the discontinuation of a National Cancer Institute-sponsored Phase I solid-tumor trial of Talvesta (talotrexin for injection) due to toxicity issues - specifically leukoencephalopathy, a side effect that also has been observed with the similar drug methotrexate. While the company has not observed any incidences of leukoencephalopathy in its ongoing Phase II ALL trial with Talvesta, it temporarily suspended enrollment in that trial as a precaution until additional preclinical work can be completed, which the company said will take at least six to nine months.

The setbacks prompted Rodman and Renshaw LLC to downgrade Hana from market outperform to market perform.

On a brighter side, the company reported progress with some of the earlier-stage product candidates in its pipeline. A Phase I trial of Alocrest (vinorelbine tartrate liposomes injection) in solid tumors is expected to wrap up in the second half of the year. Also before the end of 2007, Hana expects to initiate a Phase I trial with Sphingosome Encapsulated Topotecan in solid tumors and file an investigational new drug application for Menadione for the prevention and treatment of skin rashes associated with the use of epidermal growth factor receptor inhibitors in certain cancers.

Hana's pipeline update came less than a week ahead of the release of fourth-quarter and year-end earnings, which are scheduled Thursday. The company said it is reducing expenses and reallocating resources, and that its $35 million in cash as of Dec. 31 should be sufficient to last through 2007 and well into 2008 at a burn rate of approximately $20 million. Much of the funding was obtained last year through a $40 million private placement. (See BioWorld Today, May 18, 2006.)

The company said its investor conference call conducted on Friday would take the place of the call originally scheduled to occur following the earnings release.

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