By Randall Osborne


With the "lazy, hazy, crazy days of summer" in full swing, biotechnology news in recent weeks had to do with cold and flu treatments ¿ and the word, in the case of at least one company, might have seemed somewhat wintry to investors.

The good news: ViroPharma Inc. said its bullet for the common cold, an oral small molecule called Picovir (pleconaril) had advanced far enough that the company felt confident about submitting a new drug application to the FDA. Picovir apparently has overcome its troubled past (the drug failed Phase III trials last year).

Such things are never sure, however ¿ as Aviron Inc. found out. The firm's FluMist influenza vaccine ran into trouble with the FDA's Vaccines and Related Biological Products Advisory Committee, which said efficacy data offered by Aviron was good enough, but safety information didn't pass muster. Try again.

More than 24,000 patients have been tested with the cold-adapted trivalent vaccine, made up of two different influenza A strains and one influenza B strain selected each year based on worldwide surveillance.

Panel members seemed most worried about children, and about patients with pneumonia and asthma.

Aviron Chairman and CEO Boyd Clarke said Aviron will miss its hoped-for 2001 launch, but might still make the 2002-2003 flu season with its pioneering nasal spray. Talks with the FDA were under way.

Aviron's shares (NASDAQ:AVIR), which were held on the day of the panel meeting at $40.80, began their slide the following day, recovering by late last week to $25.95, not far from the 52-week low of $26, and a country mile from the 52-week high of $70.60.

Gone was the heyday of FluMist development, when then-president and CEO Leighton Read sat in a tower room of the Westin St. Francis hotel in San Francisco and beamed about the "biggest deal of the year" for the flu drug, a potential $400 million marketing agreement disclosed in January 1999 with Wyeth-Ayerst Laboratories' vaccines unit.

The pact called for Wyeth-Ayerst, a division of American Home Products Corp., to pay Aviron $15 million for the initial license; $15 million upon the FDA's acceptance of the regulatory filing for FluMist; and $20 million upon marketing approval.

Getting to steps two and three hasn't been easy. In September 1998, just four months before the deal was signed, the FDA had turned down Aviron's FluMist filing, because of questions about manufacturing data.

At least one other flu drug has been even less lucky. In May, Johnson & Johnson dealt BioCryst Pharmaceuticals Inc. its most decisive blow regarding RWJ-270201, a neuraminidase inhibitor in Phase III trials. J&J companies Ortho-McNeil Pharmaceuticals Inc. and R.W. Johnson Pharmaceutical Research Institute said they were returning all rights to BioCryst, which said it will look for another partner.

J&J earlier had declined to begin a pair of studies of the drug in the elderly, and had delayed another pivotal Phase III study in the U.S.

A pair of flu blockers, though, has made it to market. GlaxoSmithKline plc's inhaled Relenza (zanamivir, which was developed by Melbourne, Australia-based Biota Holdings Ltd., and licensed to the former Glaxo Wellcome plc) and Gilead Sciences Inc.'s pill Tamiflu (oseltamivir phosphate, formerly known as GS4104 and, like Relenza, a neuraminidase inhibitor), which was developed with partner Hoffmann-La Roche Inc.

Analysts noted the relative difficulty of administering Relenza, and Tamiflu took the lead. FluMist, which operates differently from the other drugs by stimulating the mucosal immune system as well as the systemic immune system and creating a cytotoxic T-cell response, seemed like the next big thing. Maybe.

The latest setback drew mixed reviews from analysts, some pessimistic reports playing into earlier nay-sayings by short sellers. Most, though, seemed to believe the news was not as bad as it looked ¿ and probably even meant a buying opportunity for those with an interest in Aviron. The panel vote, after all, was 10-4, with six of the negatives saying their votes were provisional, pending more data. And the agency hasn't finished analyzing all the data submitted with the FluMist biologics license application.

Anthony Holler, president of ID Biomedical Corp., said regulators are becoming "increasingly concerned" about live vaccine products such as Aviron's.

"Now you're going to the FDA with a live product that you're going to spray into the noses of kiddies, a lot of whom are naïve to influenza," Holler told BioWorld Financial Watch. "They should be nervous about putting anything into humans that grows. The reason [ID Biomedical does not] develop any live products ¿ all of them are subunits ¿ is that we believe, in the near future, live products won't be approved anymore."

Holler's firm has a subunit flu vaccine in Phase I testing.

"We're not going to catch up with [Aviron], because the earliest our vaccine could get on the market is the 2005 flu season, and internally we're saying 2006," Holler said.

He said Aviron likely "will be able to overcome" the FDA problem. FluMist is "a good product, but we're living in a day and age where the use of live products as vaccines is passing."

Holler noted that "people have always thought that, if you could get mucosal immunity, that would be a better type of immunity, and Aviron showed that." ID Biomedical's commitment to the mucosal approach ¿ especially with regard to improved safety ¿ led to its acquisition in March of Intellivax International Inc., for about $12.75 million in stock.

Thomas Dietz, analyst with Pacific Growth Equities, said the standards for the likes of FluMist "are the highest for any drugs. People want them to cut their data, and look at it a few different ways."

Dietz said FluMist, once approved, won't affect the neuraminidase inhibitors.

"They're very different," he said. "One is a prevention and one is a therapeutic that can be used as a prevention in some cases. And even Aviron is going to be subject to hoping that the strains predicted to be the prevalent ones are correct. They're at the same mercy of the [flu-tracking] agencies."

Whether to buy Aviron now "depends on your time horizon," he said.

"If you're looking for performance this year, you're going to have to look hard in Aviron's pipeline" for a reason to buy, Dietz told BioWorld Financial Watch. On the other hand, those willing to wait 12 months to 18 months are likely to be rewarded, he said.

Scott Stromatt, an analyst with C.E. Unterberg, Towbin, downgraded the stock to neutral and advised investors to wait until the end of this month, when Aviron is due to provide details of its dealings with the FDA.

"I don't expect it to be horrible news," Stromatt told BioWorld Financial Watch, calling the most recent delay "much ado about nothing."

Any skepticism about live vaccines, he added, "comes back from polio. A few people have gotten polio, out of the millions vaccinated."

Sharon Seiler, of Punk, Ziegel & Co., agreed.

"There's always a theoretical risk, but most of the vaccines we use are live, attenuated vaccines," she noted. Although Aviron had "nothing new to say" about the FDA and FluMist during a brief conference call Friday to discuss earnings, signs are good, Seiler told BioWorld Financial Watch.

"[FluMist] actually seems less risky than previously," she said. "Now there are a couple of discrete safety issues that can be addressed."

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