Picture a biotechnology company with a great idea.

Then picture FDA roadblocks, lawsuits flying, a CEO departing, the SEC investigating, potential Nasdaq delisting, and the shares, once soaring at just under $50, sinking to less than 50 cents.

That biotech company is Biopure Corp.

But Hemosol Corp. has a somewhat similar story. So does Alliance Pharmaceutical Corp. And even Northfield Laboratories Inc.

Why? Because those companies all developed oxygen therapeutics, also called blood-substitution products. The regulatory road for those products, so far, has proved to be never-ending, and if it weren't for opportunistic investors and constant restructuring and reshaping, that blood-substitution coterie might have gone belly-up years ago.

Of course, it's nothing new in biotechnology circles to ride the Wall Street wave, up then down. And great ideas aren't always followed by blockbuster products. But in theory, a blood-substitution product shouldn't be that hard to develop - it doesn't need to stop the growth of renegade cancer cells, it doesn't need to abate amyloid plaques in the brain. It simply needs to carry oxygen to tissue with no toxicity.

So why can't companies develop a product that does what blood does? After years of effort, those companies might now have the answer.

"Comparing [the products] to blood might not be the way to go," said Doug Sayles, director of corporate communications at Biopure. "Blood is not well understood. It's not a manufactured product. It's blood. It's the only thing we have to deliver oxygen to tissue."

The Life And Times Of Biopure

Biopure was founded in 1984 in Boston. By 1986 it had filed an investigational new animal drug application for Oxyglobin, to treat canine anemia. The product is a sterile, intravenously administered solution consisting of chemically stabilized hemoglobin in a balanced salt solution. Two years after that, it filed an investigational new drug application for Hemopure, a chemically stabilized bovine hemoglobin product, again in a balanced salt solution.

Clinical work for both products went on through the '90s, with Biopure beginning a pivotal trial for Oxyglobin in 1993. In 1995, the company moved to Cambridge, Mass., and began submitting a new animal drug application for Oxyglobin.

By 1997, Biopure was ready for a Phase III general non-cardiac surgery trial of Hemopure in South Africa and Europe. A year later, Biopure not only filed for approval of Oxyglobin in Europe, but also received U.S. clearance to sell the animal product.

Through the '90s, the company raised net funding of $242 million, and in May of 1999, it filed for its initial public offering, seeking $86 million. It ended up netting $37.7 million, and then raised $83.7 million in a follow-on offering the next year.

Things went well in 2001, with the company launching Oxyglobin in Europe and receiving approval to sell Hemopure in South Africa. Primary endpoints were met in a Phase III orthopedic surgery Hemopure trial in the States.

The biologics license application for Hemopure for acute anemia in orthopedic surgery patients and to eliminate or reduce allogeneic red-blood-cell transfusions in those patients was placed in the FDA's hands in mid-2002.

And that's when things got messy.

"We got a response letter in July of 2003, and there was some confusion over what the letter was," Sayles told BioWorld Financial Watch. At first, Biopure was under the impression the correspondence was a complete response letter, which meant that, while they needed to provide more information, they did not need to conduct additional trials.

But, Biopure "recognized [the agency was] treating it as a response letter" only, and there was more work to do. The two sides met in January 2004, and the FDA said it wanted three animal studies done, estimated to take six months. The agency expressed safety and efficacy concerns about the BLA, but agreed to continue discussions.

Around that time, class-action lawsuits were filed against Biopure, alleging it failed to disclose FDA safety concerns to the investing public. (There had also been a class-action suit in 2002, charges that eventually were dismissed.) Not long after that, Thomas Moore, CEO, president and board member, resigned. The SEC issued Wells Notices to four Biopure officers in May 2004, indicating the SEC might recommend a civil suit against the officers for violating securities laws.

Biopure's stock had sunk to beneath a dollar and the company had descended into an abyss.

Shifting Focus Of Blood Substitution

But Biopure certainly was not alone in the struggle.

There were signs as far back as 1993, when DNX Corp. dropped its hemoglobin-based blood-substitute program, citing the "significant cash requirements" that prevented them from finding a corporate partner.

Baxter International halted its blood-substitute program for HemAssist in 1998, at which point one Baxter official estimated the company had spent $500 million developing the product.

Alliance Pharmaceutical once had its product Oxygent in a Phase III cardiac surgery study and faced questions about adverse events.

Northfield filed for approval of PolyHeme in 2001 as an alternative to blood transfusions for patients with acute blood loss. The FDA turned down that application, citing concerns over an earlier trial that used historical models to compare effectiveness.

Hemosol, developing Hemolink, has put the product on the shelf to focus on commercializing blood proteins.

The companies all seemed to be running into the same problem - their products, while they carried oxygen, were not as good as blood.

"When these companies came along in the '80s, there was a different thing going on with blood," Sayles said. With fear of HIV and other infectious diseases high, the blood supply wasn't seen as safe and a product that could be used instead of a transfusion was appealing. But the blood supply is seen as safer now.

Also, when Amgen Inc. hit the scene with erythropoietin for anemia, "there was your red-blood-cell replacement" product, Sayles said.

By then, Biopure already was working toward noninferiority trials against blood because "that was what the FDA wanted to see."

As the products were developed, "it became clear the physiology of hemoglobin solution is different than blood," Sayles said. So companies sought to distance themselves from the idea that their products would actually be a blood replacement.

"That's why we've changed it to oxygen therapeutics,'" Sayles said. "It's the idea that [these products] are not really blood, but we're talking instead about oxygen delivery and maybe volume replacement. And I think that's why Northfield is the only one that proactively uses blood substitute' anymore. We want to get away from it as a misnomer."

Finding Solid Footing

Sayles said things have started to turn around at Biopure, beginning with the addition of new CEO Zafiris Zafirelis, who immediately restructured the company and cut 25 employees to reduce burn. It brought on board Martin Leon, a cardiologist and founder and chairman of the Cardiovascular Research Foundation, as chief medical officer in charge of Hemopure. And it shifted the focus for the product.

Hemopure is in clinical work for cardiovascular indications such as ischemia or acute anemia resulting from traumatic injury, including early intervention to provide immediate oxygen-carrying support in the out-of-hospital setting. Biopure is working with the U.S. Naval Medical Research Center for the out-of-hospital trauma indication, and two Phase II trials are under way - one in Europe and one in South Africa - to support the new focus.

But to enact Zafirelis' plans, Biopure needed more money - a tough task with its stock languishing at less than a buck. Still, it did what was necessary to move ahead, and in September, it raised about $7 million net, selling about 21.4 million shares of Class A stock at 39 cents per share. It also issued warrants for up to 10.7 million shares at 42 cents each.

It raised $11.6 million gross in December through 40 million shares at 29 cents apiece, attached to warrants for 20 million more at 31 cents each. Earlier this month, it raised $11.3 million, without warrants.

With cash and cash equivalents of $6.3 million as of Oct. 31, Biopure now has money to last until January 2006 and, for the first time in its last three years, its auditor did not label the company a going concern.

Who is investing in a company with nearly 70 million common shares outstanding, no real revenue to speak of and a messy history with the FDA in its closet?

"We've never had trouble finding investors, but it's more of the terms and what kinds of investors you are dealing with," Sayles said, admitting that hedge funds will invest, although they "will flip the shares and sit on the warrants." And there is the threat of naked short selling.

Biopure did generate revenue last year, bringing in $2.4 million in Oxyglobin sales, although that was down from $4 million in 2003. The problem there, again, is Hemopure. Biopure has dissolved the sales and marketing team behind Oxyglobin and now sells to about 100 core customers, but fixed manufacturing costs prevent it from being sold at a profit. If Hemopure were approved and manufacturing ramped up, Oxyglobin could be made cheaper. Until then, Sayles said he expects "lower sales for the foreseeable future."

And while Hemopure is approved in South Africa, it's never been sold. Biopure had a distribution agreement with Tshepo Pharmaceuticals, which is held by Netcare Group, but a dispute arose and Biopure ended the deal. The company is "working to transfer the license of the product to another distributor."

Others in the space are making shifts similar to Biopure's. Alliance, which through the end of September had spent $156 million on developing its oxygen therapeutics, including Oxygent, said in October the European Agency for the Evaluation of Medical Products recommended that the company pursue an indication for Oxygent that would not require direct comparison to allogeneic blood transfusion. The agency didn't think it would be possible to conduct a clinical trial comparing blood transfusion with Oxygent that was of sufficient size to show that Oxygent is as safe or safer than transfusion. The recommendation was based upon the low incidence of serious adverse effects of blood transfusion.

Like Biopure, Alliance has cut staff - now down to 35 employees - and is spending wisely in order to move ahead in a new direction.

Northfield has a Phase III trial under way, aimed at trauma in both civilian and military settings when blood is not available, with an endpoint of survival.

While Hemosol is still behind Hemolink, the company had decided it's best to "deter clinical development in lieu of a nearer-term opportunity that has a clear regulatory path associated with it," said Jason Hogan, director of investor relations at Hemosol.

The firm is focusing on its Cascade technology now, which extracts therapeutic proteins from plasma. It is looking to commercialize three protein products: intravenous immunoglobulins, alpha 1 proteinase inhibitor and von Willebrand Factor/Factor VIII.

"Our decision is based as much on what we've been through [with Hemolink] as what we've got in front of us with the Cascade technology," Hogan told BioWorld Financial Watch.

Wiser now, the group is moving on, with trial-by-fire knowledge of what it takes to develop a first-in-class therapeutic under its collective belt.

"Any time you have a product that has no precedent set, it presents two things," Hogan said. "One is a huge opportunity. And then it also presents challenges."

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