West Coast Editor

About two weeks after getting word from the FDA that Riquent, its treatment for lupus-related renal disease, was unlikely to get accelerated approval, La Jolla Pharmaceutical Co. said the company is laying off about 60 employees, leaving about 95 staffers to carry on with the drug's development.

"Their target is to reduce their burn rate so the cash lasts into [the first quarter of 2006]," said Liana Moussatos, an analyst with Pacific Growth Equities in San Francisco.

At the end of last year, the company had $23.1 million in cash, cash equivalents and short-term investments, and La Jolla raised $17.2 million (about $15.8 million after expenses) in a public offering at the start of the year.

As for the company's prospects down the road, Moussatos was cautious.

"Their chance is, if someone partners with them," she said. At the most recent American College of Rheumatology meeting, "people were getting excited about the anti-tumor necrosis factor agents, like Remicade, for lupus," she told BioWorld Today. "You could potentially see it as a combo therapy with Riquent, because Riquent is safe."

Remicade, from Malvern, Pa.-based Centocor Inc., which is a wholly owned subsidiary of Johnson & Johnson, is approved for rheumatoid arthritis and Crohn's disease in North America, the European Union and Japan.

Among the likely prospects as partners are J&J, Amgen Inc., of Thousand Oaks, Calif., and Abbott Laboratories, of Abbott Park, Ill.

"We're still underweight on the stock," Moussatos said.

Officials at San Diego-based La Jolla were traveling Wednesday and could not be reached for comment. The firm's stock (NASDAQ:LJPC) closed that day at 65 cents, up 2 cents.

In the restructuring, termination benefits (mainly in the form of severance costs) are expected to total about $1.5 million, of which about $1.3 million will be recorded in the first quarter and the remainder in the second quarter.

The disappointment regarding accelerated approval was just the next dollop of bad regulatory news for La Jolla, after last fall's approvable letter for Riquent (abetimus sodium) asking for another clinical trial, thus delaying the compound's entry into the market by as long as four years. That event knocked off about half the value of the company's shares, putting the price at $1.09 at the end of the day. (See BioWorld Today, Oct. 18, 2004.)

Under Subpart H, the FDA's accelerated approval regulation, a post-marketing trial to confirm clinical benefit can begin before approval, but does not need to be completed until after approval. La Jolla started a Phase IV trial in August, planning to enroll between 500 and 600 patients. (See BioWorld Today, Aug. 3, 2004.)

In November, La Jolla provided an update on the clinical work and said it had met three more times with FDA officials, providing additional evidence of Riquent's efficacy. But the agency said in the middle of last month that Riquent probably would not be cleared under the Subpart H rule - that is, another completed trial proving clinical benefit is still necessary - news that reduced the share price by more than 42 percent, bringing it down to 69 cents.

October's approvable letter aired concerns over the Phase III study called 90-05, which failed to show a clinical benefit in the delayed time to renal flare endpoint. La Jolla tried again, with Phase III study 90-09, which focused on a subgroup of patients with high-affinity antibodies to double-stranded DNA. That trial also failed.

Back in December 2003, the firm had submitted the new drug application for Riquent on guidance from the FDA. Data gained at that point were less than stellar overall, but did show fewer renal flares and fewer major systemic lupus erythematosus flares in patients treated with the drug, suggesting a benefit to patients if antibodies to double-stranded DNA were reduced. (See BioWorld Today, Feb. 19, 2003, and May 6, 2003.)

Since the agency had been somewhat encouraging, La Jolla officials said they were surprised by the October approvable letter that required yet another trial. Few observers may have been surprised, though, by La Jolla's latest action - a restructuring that will begin immediately but not be completed until the second quarter of this year.

The firm previously warned that failure to win accelerated approval under Subpart H, and failure to raise more cash through stock sales or a partnership, would mean cost-cutting measures. (See BioWorld Today, Jan. 31, 2005.)

La Jolla plans to forge ahead with its ongoing trial of Riquent, not significantly adding to patient enrollment or site expansion, and intends to continue its small-molecule inflammation program. Efforts to file for marketing clearance for Riquent in Europe will continue, too.

But the key to the future will be a collaborative agreement, Moussatos said, noting that La Jolla believes Riquent's compelling clinical profile and approvable letter might interest a rheumatology firm.

"J&J is aware of it," she said, and La Jolla is expected to provide updates shortly on its partnering efforts.