National Editor

With tezacitabine failing to reach the performance bar set for it in a Phase II trial against gastroesophageal cancer, Chiron Corp. is halting development of the nucleoside analogue acquired in the buyout of Matrix Pharmaceuticals Inc. a year ago.

"It looked promising," said John Gallagher, media relations manager at Emeryville, Calif.-based Chiron, calling the drug "a reasonable investment for a compound at that stage in its development" and adding that it seemed to have properties similar to gemcitabine (Gemzar, Eli Lilly and Co.).

Wall Street took the news about tezacitabine in stride. Chiron's stock (NASDAQ:CHIR) closed Friday at $45.90, down 95 cents.

"This would have been a big deal a year ago," said Thomas Shrader, director of health care equity research with Harris Nesbitt Gerard in New York. The spotlight has been taken off tezacitabine as Chiron talks more about its Proleukin cancer program, he said.

"I was out there to see them and I said, Why do you want to do cancer? You're going to eat Roche's lunch in blood testing. You're going to eat Aventis' lunch in influenza,'" Shrader said.

Chiron and Cambridge, Mass.-based Genzyme Corp. "are both enamored with the Avastin miracle, but it's a lot harder than you think," he said.

With the success of South San Francisco-based Genentech Inc.'s Avastin (bevacizumab), a monoclonal antibody for colorectal cancer, "they all want to become Genentech," Shrader said, which means those companies would simply have to "work almost exclusively on cancer for 25 years and have a lot of good people."

Gallagher said Chiron has maintained from the start that its focus would be in cancer and infectious diseases.

Chiron did not release details of the Phase II tezacitabine results, but said no safety issues surfaced with tezacitabine and side effects were similar to those of other nucleoside analogues, with fevers and clinically manageable reductions in white-blood-cell counts the most commonly reported.

"This was a relatively straightforward drug, a modification of a well-accepted class," Shrader said. "It probably wasn't a huge leap of faith that this would work."

Designed to affect DNA synthesis, tezacitabine went through several Phase I studies with Fremont, Calif.-based Matrix, which Chiron bought at the start of 2002 for $61 million in cash. Phase II trials also have been completed with the drug in colorectal cancer, Chiron said, but the drug won't go forward in that indication, either. (See BioWorld Today, Jan. 8, 2002.)

"They said they had warned us about the colorectal [trial], but I don't remember that," Shrader said. Gallagher said the company talked about the trial in an earnings call last year.

Matrix had problems with its drugs before. In the fall of 2001, the firm laid off 40 percent of its work force and said it would sell its San Diego-based manufacturing facility, because chances looked dim for near-term approval of IntraDose (cisplatin/epinephrine) for head and neck cancer. In 1997, the company said goodbye to 66 of its 183 employees following failure of AccuSite, a genital-warts drug. Matrix said then it was restructuring to focus on cancer drugs. (See BioWorld Today, Oct. 2, 1997, and Oct. 11, 2001.)

Alex Hittle, analyst with A.G. Edwards in St. Louis, told BioWorld Today that Matrix was "a company that was broken and had one asset that Chiron, for one reason or another, thought was interesting. They were able to pick it up on the cheap and finished blowing it up themselves."

Failed experiments aside, the blood-testing and flu vaccine portions of Chiron's business helped the company to pro-forma income of $297 million for the year ended Dec. 31, with fourth-quarter pro-forma income of $56 million - well in line with consensus estimates. Gallagher said he expects the company, which is known for its diversified efforts, to become even more identified with flu vaccines in the years ahead.

Meanwhile, Proleukin (aldesleukin), interleukin-2 for metastatic melanoma and metastatic renal-cell cancer, is Chiron's oncology portfolio leader, which racked up $115 million in sales last year. (See BioWorld Today, Jan. 30, 2004.)

The company has a Phase II trial testing Proleukin in combination with rituximab - sold as Rituxan, from Genentech and Idec Pharmaceuticals Inc., of San Diego (now Biogen Idec) - for low-grade non-Hodgkin's lymphoma in patients who have previously failed rituximab treatment.

A second Phase II trial in rituximab-na ve patients with low-grade NHL is expected to begin later this year. Earlier this month, Chiron teamed with Berkeley, Calif.-based XOMA Ltd. to develop cancer drugs. (See BioWorld Today, March 2, 2004.)

Chiron's first small-molecule compound, the growth factor kinase inhibitor CHIR258, entered Phase I testing early this year, and the company plans to file an investigational new drug application in 2004 for anti-CD40, a monoclonal antibody with potential to target B-cell hematologic malignancies.

The company had other significant news Thursday, when it provided an update on the soon-to-begin Phase III trial of Tifacogin, the drug that failed against sepsis last year. Chiron's new study, in severe community-acquired pneumonia, will enroll 2,100 patients and will have a primary endpoint of 28-day all-cause mortality.

Said Hittle, who owns no Chiron stock: "I thought they made quite an interesting argument that this is worth a go."

Shrader was less convinced. "It's complicated," he said. "They're doing a lot of retroactive data analysis to try to understand which groups to treat. I can't say I found their logic easy to follow, but they finally have their big Phase III trial that will cost $20 million and investors can worry about."