By Matthew Willett

The FDA¿s Arthritis Advisory Committee met Thursday on Aslera, Genelabs Technologies Inc.¿s treatment for lupus, but didn¿t vote after a day of questions about the company¿s regulatory package data.

Genelabs¿ stock was crushed Wednesday amid a pre-meeting FDA review that led investors to believe trial data did not support approval. Trading on the stock (NASDAQ:GNLB) was suspended Thursday following its 53 percent loss Wednesday, as it fell $1.95 to close at $1.75.

Aslera¿s new drug application was submitted in September. It received priority review status in October, and was scheduled to go under review by the Arthritis Advisory Committee in March, but was rescheduled for Thursday.

In Phase III testing Genelabs reported that data showed Aslera significantly improved disease activity and symptoms of patients with lupus. A separate Phase III trial showed Aslera in combination with prednisone improves bone mineral density and prevents bone mineral density loss in female patients with lupus, the company said.

CIBC World Markets analyst Elliot Wilbur said after the meeting Thursday that it appeared to be a case of the board¿s clinician side battling its statistician side.

¿Going into it expectations were very low that this drug would be approved based on pure statistics and stringent statistical adherence,¿ Wilbur told BioWorld Today. ¿I think that at the panel hearing, as the panel hearing began to progress and through the day it became clear that a clinician¿s perspective seemed to dominate over pure statistics.¿

By the end of the day, Wilbur said, it looked more encouraging for Genelabs than Wednesday¿s market reaction would have suggested.

¿I think the moderator several times, in addition to trying to get a vote and never getting one, said that there are issues with the statistics, and they¿re not as clear as they would like to see, but they all agreed that there¿s some efficacy there,¿ he said. ¿At the end of the day no one said they¿d strongly object to approval.¿

Last year Genelabs, of Redwood City, Calif., entered a collaboration with Watson Pharmaceuticals Inc. for Aslera. That agreement gives Corona, Calif.-based Watson an exclusive license for North American rights to Aslera. (See BioWorld Today, Nov. 14, 2000.)

Under the agreement, Watson will pay Genelabs fees and milestone payments up to $55 million, including a $10 million nonrefundable initial license fee with milestones payable upon FDA approval of Aslera. Genelabs would receive royalties on net sales of Aslera and retains future co-marketing rights.

Watson also agreed to purchase 3 million unregistered shares of Genelabs common stock for an aggregate purchase price of about $6.85 per share, or $20.5 million. Under the agreement, Watson has a five-year warrant to purchase 500,000 additional Genelabs common shares exercisable at $6.85 per share.

Aslera is an orally administered, highly purified prasterone, which is the synthetic equivalent of dehydroepiandrosterone, or DHEA, a naturally occurring hormone. Its use as a supplement has shown efficacy as a treatment for systemic lupus erythematosus (SLE).

SLE is an autoimmune disease affecting about 1 million people worldwide. It causes severe fatigue, arthritis, facial rash and unusual sensitivity to sunlight. It can lead to serious inflammation of the lungs, heart and brain, as well as kidney failure.

As of Dec. 31 Genelabs had $34.7 million in cash and short-term investments.

Genelabs officials did not return phone calls seeking comment.

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