Washington Editor

Wall Street did not look kindly on ISTA Pharmaceuticals’ failure to meet its primary endpoint in two pivotal Phase III studies of Vitrase, a single injection for treating vitreous hemorrhage.

ISTA’s stock (NASDAQ:ISTA) fell 67.8 percent Tuesday to close at 91 cents, down $1.92.

While the trials did not prove Vitrase has a statistically significant ability to clear an eye hemorrhage to enable diagnosis or treatment, Vicente Anido, CEO of Irvine, Calif.-based ISTA, told BioWorld Today that Vitrase did produce visual acuity in patients and a decreased hemorrhage density. Vitrase is an FDA-designated fast-track product that is injected directly into the eye.

“The next step is for us to go back to the FDA with this data and discuss it with them,” Anido said. “[The FDA] could say one of two things. They could say Forget it, you missed, go home.’ Or they could say, Wait a minute, within your trials already, if you limit your labeling, there’s some points of visual acuity improvements where we have confirmation between the two trials,’ so we could just stop there.”

Anido said ISTA has been in contact with the FDA, but the company is unsure when a meeting will take place.

Steve Gerber, managing director of CIBC World Markets Corp. in Los Angeles, downgraded ISTA’s stock in a research note from “strong buy” to “hold,” saying “the path forward is unclear.”

Gerber told BioWorld Today that the primary endpoint was an unfortunate choice negotiated by prior management no longer employed by ISTA. “These studies were set up two or three years ago,” he said. “To me, the primary endpoint doesn’t make a lot of sense, whereas the clinical endpoints that were secondary make a lot more sense to me.”

Indeed, data from the secondary endpoints demonstrated relevant changes in best-correct visual acuity (BCVA) at 55-dose units in both studies. And the trial outside North America showed improvement in time required to achieve better results in the three-line visual acuity eye chart.

The trials enrolled 1,306 patients who participated in one of two randomized, double-blinded, placebo-controlled international studies.

In addition to improvement in BCVA, the company said patients treated with Vitrase showed a clinically meaningful decrease in the density of the vitreous hemorrhage.

Adverse events in both studies were iritis, hyperemia and ocular pain, with iritis occurring most frequently. In North America, other adverse events were eye irritation, increased lacrimation, reduced visual acuity, vitreous hemorrhage, photophobia and photopsia.

The U.S. market for vitreous hemorrhage is between 4500,000 patients and 500,000 patients annually, Anido said.

“I think the good news is the FDA has recognized with their fast-track status that this is an important unmet medical need and there are no medical alternatives to surgery,” Gerber said. “I suppose the FDA can be flexible in allowing an approval based on clinical endpoints, although I think that’s not overwhelmingly likely, in my experience.”

As for ISTA’s partners, Allergan Inc., also of Irvine, and Otsuka Pharmaceutical Co. Ltd., part of the Otsuka Group, of Tokyo, Gerber said the next question is how the companies will protect themselves. “I don’t think it is in [the partners’] interest to let this go out of business,” he said. “I think those companies will be in a position where they will see fit to either further invest or buy it for a song.”

Anido said he remains in contact with the partners. Since Allergan has rights to the bulk of the world, including the U.S., Anido said it has been involved in all data reviews and is working to plan regulatory strategy.

While Gerber said ISTA likely will need to raise more money, Anido said the company wouldn’t be spending as much this year. As of Dec. 31, ISTA had $15.6 million in cash and 16.4 million shares outstanding. The company had a net loss of $22.5 million for 2001.

ISTA also is studying Vitrase for patients with diabetic retinopathy, a leading cause of adult blindness. Results of the vitreous hemorrhage study will have no impact on the diabetic retinopathy study. Anido said the latter indication is a much larger U.S. market, totaling about 5 million people. The company recently released positive interim results from a Phase IIa study in diabetes retinopathy patients.