By Randall Osborne

Editor

With a crispness already in the North American air and influenza germs huddling like football players in the locker room for an attack on victims, biotech firms with drugs against flu are hunkering down for a fight, too against each other.

The battle looks somewhat different than it did a year ago.

Last fall, the lineup seemed simple enough. Two recently approved flu blockers were pitted against each other: Glaxo Wellcome plc's inhaled Relenza (zanamivir, which was developed by Melbourne, Australia-based Biota Holdings Ltd., and licensed to Glaxo) 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.

"Relenza was dead on arrival," said Scott Stromatt, an analyst with C.E. Unterberg, Tobin. "It was a complicated powder you have to inhale, and the market share was quickly taken away by Tamiflu."

One more competitor Aviron Inc.'s inhaled FluMist waited on the bench. But it's been stalled by validation problems and manufacturing questions about its contractor, Medeva Pharma Ltd.

FluMist, with a different mechanism of action from the other compounds, could be a powerful weapon in managed care. The drug is a cold-adapted trivalent vaccine with two influenza A strains and one influenza B strain, selected each year, based on worldwide surveillance. Internal flu proteins from the master strains of influenza A and B virus grow at cooler temperatures and combine with hemaglutinin and neuraminidase, which are surface proteins found on contemporary circulatory viruses. By stimulating the mucosal immune system as well as the systemic immune system, FluMist creates a cytotoxic T-cell response.

Stromatt, an internist by training, said he is optimistic about FluMist.

"It's a nice alternative, since you don't have to have a needle," he said, and the powder is not complicated to administer, like Relenza. "Aviron's supposed to file [for approval by the FDA] by the end of the year." If that happens, FluMist should be approved in time for next year's flu season, Stromatt said.

Aviron points out its immunizing drug plays in a different league than the neuraminidase inhibitors, but the clock has started ticking in the fourth quarter, when Aviron's new drug application FDA paperwork is due. Not quite a 2-minute warning, but close.

Meanwhile, Aviron's manufacturing contract for FluMist with Evans Vaccines Ltd. (formerly Medeva's vaccines branch) recently acquired by PowderJect Pharmaceuticals plc has been reshaped. Under the new terms, Aviron will pay $15 million up front and $4 million per year for five years, plus potential milestones, and will provide Evans with warrants to subscribe to Aviron stock.

Also, the company's research and development agreement for FluMist was extended with the National Institute of Allergy and Infectious Diseases (NIAID) of the National Institutes of Health, making the pact valid through June 2003.

Aviron raised $8 million through a stock sale to Acqua Wellington Asset Management LLC, and got another $2.7 million in a challenge grant from NIAID to develop a vaccine against possible pandemic flu viruses, using the FluMist technology.

Kaiser Permanente has begun a pivotal study of 15,000 children ages 1 to 17 to evaluate Aviron's flu vaccine at a center in Oakland, Calif.

Stromatt acknowledged the FluMist glow has faded, since word broke in January 1999 of Aviron's potential $400 million deal with Wyeth-Ayerst Laboratories' vaccines unit, but said FluMist likely will be as strong as promised when it reaches the market.

Another, more recent change in the flu picture's configuration came with the surprising setback this month for BioCryst Pharmaceuticals Inc., which heard from partner R.W. Johnson Pharmaceutical Research Institute that two clinical studies of the pair's neuraminidase inhibitor pill in elderly patients at high risk for influenza will not be carried out.

RWJPRI cited "logistical" reasons. But, for analysts and investors, the snag for BioCryst's drug was as suddenly disappointing as the road bump for privately held Aviron's FluMist. BioCryst's stock nose-dived 53 percent.

"I like the story, and I was really bummed when they made this announcement a couple of weeks ago," Stromatt said.

Though BioCryst might seem to be stymied by the RWJPRI timeout for the high-risk elderly studies, Phase III trials in the general public with the flu drug are ongoing.

"I don't think [BioCryst's drug] will get expedited review," Stromatt said. "It's another neuraminidase inhibitor. It's supposed to be a little better than Tamiflu, with less gastrointestinal upset, and it only has to be taken once a day. But they're just now doing the pivotal trial here in the U.S."

He said BioCryst's drug could be approved near the end of this year, but "probably won't make an impact until 2003-2004."

Of course, there's still the long relied-upon, dreaded-by-many flu shot. It's what many of the other drugs and vaccines are designed to let patients avoid. And even the shot has made news lately, when a population study seemed to indicate flu vaccination reduces the risk of primary cardiac arrest. The study was published Oct. 1 in the American Journal of Epidemiology.

As an indication worth aiming for, influenza is hot. This is true even for companies behind in the race, such as Montreal-based Intellivax International Inc., whose nasally administered mucosal proteosome influenza vaccine this month began Phase I trials. Microparticles of purified proteins work as a delivery system and adjuvant, in a technology that Intellivax says has been proven safe and immunogenic with other vaccines in Phase I and Phase II trials.

As winter nears, flu is making news in diagnostics, too. The FDA this month granted Quidel Corp. the go-head to make widely available its nasal swab test for influenza, which identifies A and B strains of flu in about 10 minutes.

Stromatt said an irony in the flu race is that, in a year when Aviron and BioCryst are being held back, a shortage may arise of the conventional vaccine.

"One of the strains is difficult to grow in culture, and King Pharmaceuticals Inc., [one of four flu-shot vaccine makers] decided it's a low-margin product and not that big of a deal," especially given Good Manufacturing Practices requirements imposed by the FDA, Stromatt said, noting that about 75 million people get vaccinated yearly.

He said Wyeth-Ayerst will probably pick up the manufacturing slack, "but there might be a four-week to six-week delay. Gilead has traded on that."

In the 1997-1998 flu season, he noted, there was plenty of vaccine but it didn't guard against the most prevalent strain.

"We didn't have a pandemic," he said. "The world didn't fall apart."

For alternatives to the shot, all eyes are still, for the most part, on Tamiflu, approved in October 1999, and Relenza, given the FDA's nod the previous summer.

In June, Roche filed a new drug application for use of Tamiflu and Tamiflu oral suspension in children 12 months and older. A month earlier, the company asked the FDA to expand the label to include the prevention of naturally occurring influenza in adults and adolescents 13 years and older.

As plainly as Tamiflu has the lead, and as far behind as the competitors stand, Stromatt said he would not recommend buying the stock just yet.

"It's a neat drug, but I think the numbers this year will disappoint, so I'm telling clients to wait," he said. "[Gilead will] get the prevention indication by the end of this year, I bet. It really works well, and has showed an 89 percent reduction in passing the flu from one family member to another."

More education needs to be done, too, Stromatt said.

"The flu season is a short season, 14 weeks to 16 weeks," he said. "As an internist. I've talked to my buddies, and they haven't even heard of Tamiflu. And patients have to get in and get started [on the medication] in 48 hours" after onset, he added.

Gilead is "just price-sensitive, so I wouldn't buy it yet," Stromatt said, but would wait for a better price after prescription tallies are available later this year, and then jump aboard the Gilead bandwagon, pulled by a strong drug.

"In terms of competitive threats," Stromatt said, "they don't have any." *

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