By Kim Coghill

Washington Editor

Stock prices for Genentech Inc. and XOMA Ltd. slipped Friday after the California-based companies said they will delay regulatory filing of their psoriasis drug due to an additional request by the FDA.

Genentech¿s stock (NYSE:DNA) closed Friday at $41.51, down $1.64, while XOMA¿s stock (NASDAQ:XOMA) sank $2.76, or 28.2 percent, to close at $7.

The FDA request for a study to confirm the equivalence between materials used for testing and for manufacturing will delay submission of the biologics license application for Xanelim (efalizumab) about six months.

Xanelim, for moderate to severe psoriasis, is administered subcutaneously once weekly for three months. In two pivotal Phase III trials, Xanelim met its primary endpoint of achieving a 75 percent or greater improvement in Psoriasis Area and Severity Index scores over placebo. (See BioWorld Today, May 25, 2001.)

The companies had planned to file for approval late this year or in the first quarter next year. The new target date is summer 2002, with an estimated approval date a year later.

¿There¿s no problem with the product or the manufacturing process,¿ Ellen Martin, director of corporate communications for Berkeley-based XOMA, told BioWorld Today.

Wendy Emanuel, spokeswoman for South San Francisco-based Genentech, said that during the Phase III trials minor manufacturing modifications were made. ¿During the transition from small-scale material [in clinical trials] to Genentech¿s large-scale material, modifications were made. This is a planned part of the manufacturing process to go to this large-scale material that would be used for large-scale production.¿

She said Genentech will begin the study as soon as possible.

According to the research notes of Dennis Harp, an analyst with Deutsche Banc Alex. Brown Inc. in New York, the delay will have a minimal impact on Genentech because at peak, Xanelim would account for less that 10 percent of Genentech¿s total sales. Furthermore, sharing the profit with XOMA will reduce Genentech¿s take.

Emanuel would not discuss how the profits will be split between the companies.

In his note, Harp said Xanelim demonstrated a favorable efficacy and safety profile compared to the Phase III results of Amevive, Biogen Inc.¿s drug for psoriasis. In Biogen¿s Phase III trials, 21 percent of patients achieved complete response at the end of 14 weeks.

Biogen, of Cambridge, Mass., Friday released a statement saying the FDA and the European Agency for the Evaluation of Medicinal Products accepted the Amevive applications for review. Amevive, also developed for moderate to severe psoriasis, can be delivered intravenously or intramuscularly.

¿This means Biogen is about a year ahead of Genentech and XOMA,¿ Elise Wang, an analyst with Salomon Smith Barney in New York, told BioWorld Today. ¿Before today¿s news, Genentech was only about two months behind.¿

Wang said the U.S. market for the Biogen and Genentech products could peak at $500 million.

She added that each product has good points. Patients tend to respond quickly to Xanelim, but once taken off the drug, they relapse or rebound quickly. Comparatively, it takes Amevive patients longer to respond, but if they do respond, there¿s a long duration of effect, Wang said.

Xanelim, a humanized monoclonal antibody, is designed to inhibit the binding of T cells to other cell types and to target three psoriasis processes. According to the National Psoriasis Foundation in Portland, Ore., about 7 million people in the U.S. are affected by psoriasis, a non-contagious, chronic skin disease. The most common form is plaque psoriasis, which is characterized by inflamed patches of the skin topped with silvery white scales.

Martin said a significant number of patients who have never been treated participated in Xanelim clinical trials. Out of the 7 million people suffering from the disease, only an estimated 1.5 million are being treated, according to the foundation.

Genentech and XOMA initiated the $35 million deal to co-develop Xanelim back in 1996. The agreement called for XOMA to pay for Phase I and Phase II trials, and for Genentech to pay for Phase III trials. Genentech will pay for 87.5 percent of anything beyond Phase III with XOMA covering the remaining 12.5 percent.

Martin called the request for an additional study a bump in the road for Xoma. ¿XOMA has three years worth of cash in the bank, which is enough to get us through an approval, and we have three partnerships.¿

Aside from the Genentech deal, XOMA is in Phase II studies with Baxter Healthcare Corp. for the development of Neuprex for multiple indications, and the company is in Phase II and Phase III trials with Onyx Pharmaceuticals Inc. for Cl-1042, a cancer product.

XOMA has $71.8 million in cash and 69 million outstanding shares, including the 3 million common shares the company sold in June. XOMA raised $43 million in that deal. (See BioWorld Today, June 27, 2001.)