By Kim Coghill

Washington Editor

Alliance Pharmaceutical Corp.'s stock Tuesday shot up 58 percent after it released preliminary data showing that there is no evidence to link its product, Oxygent, directly to an imbalance in certain adverse events, primarily stroke.

The San Diego-based company and its partner, Baxter Healthcare Corp., of Deerfield, Ill., two months ago suspended enrollment of a Phase III cardiac study of Oxygent (perflubron emulsion) due to an imbalance in adverse events. Upon stopping the enrollment, Alliance's stock (NASDAQ:ALLP) fell 68 percent to close at $2.375, down $5.125. (See BioWorld Today, Jan. 10, 2001.)

But on Tuesday, the stock closed at $3.906, up $1.437, after the company said preparations are back on track for the continued development of Oxygent.

Gwen Rosenberg, Alliance's vice president of corporate communications, said the company hasn't determined whether it will restart the Phase III cardiac surgery trial or if it will begin a second general surgery Phase III trial. "We should be able to provide a better update in May or June," she said. "It is possible that Oxygent just will be used in general surgery patients because it did well in those studies."

Oxygent is an intravenous oxygen carrier - a sterile emulsion of the color of milk - that is comprised of liquid perfluorochemical (PFC) core particles surrounded by a surfactant and suspended in a water-based solution. The synthetic PFC particles have the ability to dissolve and transport oxygen, carbon dioxide and other gases. Oxygent is fed into the patient's bloodstream and acts as blood would, picking up oxygen in the lungs and delivering it to tissues, then pulling carbon dioxide from the tissues and toting it back to the lungs for exhalation. The body cleans Oxygent from the blood itself, breaking down the surfactant and expelling the PFC through the lungs within 48 hours.

Fariba Ghodsian, managing director of health care research at Roth Capital Partners Inc. in Los Angeles, said of Alliance's preliminary data, "Clearly there is opportunity here because it puts Oxygent back on track. Whether they do another Phase III for general surgery or if they opt to do another Phase III on cardiac, clearly the fact that they did not find a safety issue with Oxygent is positive."

For general surgery (including gynecological, urological, cancer, orthopedic and vascular surgeries), Ghodsian said the U.S. and European market for Oxygent could reach an annual level of $2 billion. Sales for cardiac surgery would be less.

Alliance's stock jumped almost 11 percent in September when the company said initial data analysis of the Phase III European study of Oxygent showed a statistically significant reduction in the need for donor blood in surgery patients. (See BioWorld Today, Sept. 12, 2000.)

The adverse events in the cardiac study appear related to the rapid harvesting of additional blood from the Oxygent-treated patients prior to surgery, as well as other differences between the treatment and control groups.

Going forward, Ghodsian said that Alliance and Baxter could modify the additional hemodilution process in order to continue trials in cardiac patients.

Alliance and Baxter in May 2000 established an agreement for Oxygent, which gives Baxter an exclusive license for the sales and distribution of the product in the U.S., Canada and Europe, with a manufacturing option. At the time of the agreement, Baxter purchased $20 million of convertible preferred Alliance stock. In order to maintain its rights to commercialize the product, Baxter agreed to invest $30 million in convertible redeemable preferred stock during 2001. (See BioWorld Today, May 15, 2000.)

According to a statement released by Alliance, the companies have agreed that a $15 million stock purchase scheduled for Thursday will be delayed until May 1.

In response to that, Ghodsian wrote in research notes, "We believe that Baxter is committed to this program. However, the delay in a $15 million payment may provide some strain on Alliance's cash balance of about $30 million, which is below one year cash considering the company's burn rate of approximately $40 million. We therefore believe that Baxter's payment in May and final plans for the second Phase III of Oxygent will be major events for Alliance."

Oxygent has been administered to more than 800 subjects in 20 clinical studies that enrolled about 1,500 healthy volunteers, general surgery patients and cardiac surgery patients. Oxygent has been well tolerated in all those studies, and no significant adverse effects have been directly attributed to the drug, the company said. n