By Brady Huggett

NeoTherapeutics Inc., figuring what worked once should work again, established NeoOncoRx Inc. as a wholly owned subsidiary.

"We did this about a year ago with NeoGene and that is coming along nicely," said Alvin Glasky, CEO, chief scientific officer and chairman at NeoTherapeutics. "We really created a model for [NeoOncoRx]. What we are trying to do is remain clearly focused in the neurological area."

NeoGene Technologies Inc. was formed in November 1999 to focus on functional genomics research. It has progressed and functioned well enough since then to make the idea of a second subsidiary a good move.

Glasky said the road followed by NeoOncoRx will be the one paved by NeoGene. Like NeoGene, NeoOncoRx will be wholly owned at first and funded through outside investors. Like NeoGene, the new subsidiary will focus on its specialty - in NeoOncoRx's case, anticancer drugs - without the interference of NeoTherapeutics' neurological aspirations. And like NeoGene, the long-term plan might be a public company.

"It is our intent to consider taking NeoGene public," Glasky said. "But NeoTherapeutics would retain at least some control of it. NeoOncoRx may go public also, if the market conditions are right and we have created value in it. [Going public] gives [NeoOncoRx] incentive and control and the parent gets the benefit.

"Those things could have been done in NeoTherapeutics," he added. "But it would have diluted our focus."

Glasky said the subsidiaries allow NeoTherapeutics to diverge into areas of interest while not straying from its own path, which right now is pushing its lead product, Neotrofin.

"We are excited by Neotrofin and committed to that," Glasky said. "But we want to take advantage of opportunities that are presented to us. We want to have these interests, not diluted by the neurology focus, within an entity that can make its own decisions."

Neotrofin (AIT-082) is headed for a Phase III trial in Alzheimer's disease. A Phase IIb trial in the United States was deemed nonconclusive, Glasky said.

"We did not believe that was an optimal dose in the Phase IIb study," Glasky said. "We are directed toward a 500-mg use now. We are hopefully going to start a Phase III trial in the first half of next year. We're finalizing our protocol now, and should file it with the FDA by year's end. This is a major hurdle we are going after and we want the FDA to be our partners in this."

NeoTherapeutics, of Irvine, Calif., focuses its research and development program on designing and developing small molecules for neurological and psychiatric diseases and conditions, including Alzheimer's and Parkinson's diseases, peripheral neuropathy, stroke and spinal cord injury. NeoTherapeutics' pipeline includes AIT-082 for other indications - it's in the research stage for stroke and preclinical stages for neurodegeneration and spinal cord injury. Its product AIT-034 for dementia is in the preclinical stage, as is AIT-203 for Parkinson's disease, AIT-297 for treating migraines and AIT-202 for depression and obesity.

NeoOncoRx initially will be funded by seed capital supplied by its parent. Glasky said the next steps then would be to raise about $5 million in a first round or private placement, look to in-license three to five anticancer products, and then seek a second round of financing.

NeoOncoRx already has its man for the helm.

Luigi Lenaz, who has run the gamut in the fight against cancer, was appointed president of the new subsidiary. Lenaz spent almost 20 years with Bristol-Myers Squibb Co., of New York, in its anticancer drug development area. He managed the activities supporting the worldwide launch of Taxol, directed applications to the FDA for Etoposide and Amascrine and has worked in coordination with the National Cancer Institute on cisplatin. At SuperGen Inc., of San Ramon, Calif., Lenaz organized the clinical development of Rubitecan as senior vice president of clinical research and medical affairs, and helped in-license several other drugs. And before his jump to the pharmaceutical industry, he was a cancer researcher.

"[Lenaz] is probably the pre-eminent cancer drug developer in the world," Glasky said. "To get someone like that to come into this is really a coup."

NeoTherapeutics' stock (NASDAQ:NEOT) moved up 37.5 cents Wednesday, or about 7 percent, to close at $5.687.