By Mary Welch

Alkermes Inc. said the R.W. Johnson Pharmaceutical Research Institute (RPI), a Johnson & Johnson company, ended a collaboration to develop an injectable sustained-release formation of erythropoietin, based on Alkermes¿ ProLease drug-delivery technology. Erythropoietin is a red blood cell booster used to treat anemia.

The news sent Alkermes¿ stock tumbling 28 percent. Alkermes (NASDAQ:ALKS) closed Monday at $38.50, down $15.75.

¿We really didn¿t expect much from this program, frankly,¿ said Franklin Berger, an analyst with J.P. Morgan of New York. ¿I don¿t see this as any great loss to the company. I don¿t know why people sold the stock. We see it as a tremendous opportunity, because their stock has been difficult to buy because of the high price. We see it as a great opportunity to buy.¿

No reason was given for the project¿s demise.

Berger said that while no outsider really knows what happened, ¿clearly it wasn¿t fulfilling what J&J wanted. They probably realized that they would not be able to effectively deliver a safe and effective product that could compete on their timetable. I think the issues are related to formulation. ProLease is highly flexible, but the flip side is that it costs time and money to go through all the options to get the right formulation.¿

Officials at Alkermes were not available for comment Monday, but in a statement the company¿s CEO, Richard Pops, said he was ¿disappointed¿ with RPI¿s decision to end the partnership. ¿We have multiple collaborations in place for our sustained-release drug delivery systems. While we hope that every collaboration results in a marketed product, we know that attrition is inevitable,¿ he said.

Berger agreed. ¿They have three basic programs, and several activities under each of them, and are making progress in all of them. This is not a blow at all.¿

Alkermes, based in Cambridge, Mass., and RPI joined forces in 1998 for the development of ProLease EPO in a deal worth at least $30 million. RPI is based in Raritan, N.J.

A ProLease formulation would be designed to enable single injections of the compound to last for several weeks. At the time of the deal, it was the third collaboration between Alkermes and Johnson & Johnson companies.

ProLease is designed specifically for complex and fragile bioactive molecules, such as proteins. It is a microsphere-based delivery system composed of the desired bioactive molecule incorporated into a matrix of a common biode gradable medical polymer.

The process is unique because drug encapsulation is achieved in the absence of water and at very low temperatures. ProLease formulations are done in liquid nitrogen, at extremely cold temperatures to preserve their activity. These conditions are particularly suitable for fragile molecules such as proteins and peptides, for which maintaining stability is a concern, the company said.

Johnson & Johnson licensed erythropoietin from Amgen Inc., of Thousand Oaks, Calif.

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