By Mary Welch

Isis Pharmaceuticals Inc., coming off a Phase III failure, tightened its belt, cutting staff by nearly 40 percent and prioritizing its antisense drug efforts. That move coupled with existing financial resources should provide the Carlsbad, Calif., company enough operating cash for the next three years.

"The failure of Isis 2302 was a disappointment but it was a setback of a single trial of a single drug in a single indication," said Stanley Crooke, Isis' chairman and CEO. "We believe our technology and pipeline are robust and present a tremendous value to our shareholders. We are now planning key steps to enhance that valuation in the near term."

The company's first step was slicing about 160 jobs, approximately 47 percent of which were in antisense development. The layoffs will result in an operating loss reduction of 33 percent. Prior to the cutbacks the company had about 400 employees.

On the financial side, the company is ensuring it has enough cash to run for three years. It ended 1999 with about $55 million in cash and has $50 million in committed funds from partners. Isis intends to do a $24 million equity financing deal this year. "That equity financing will be sufficient for our needs and will have minimum dilution," Crooke said. "What we have is about $130 million in cash and cash commitments."

Although the company has $90 million in debt, there is "little cash needed for debt service and, on balance, we feel quite positive about it," Crooke said.

As part of the restructuring Isis will focus on several programs aimed at developing its drugs with the maximum potential.

Highest on Isis' list is Isis 3521, an inhibitor of protein kinase C-alpha expression, which recently went into Phase III trials for non-small-cell lung cancer. Other high-priority drugs are Isis 2503, which targets the Ha-ras, and is in Phase II trials for pancreatic and breast cancer, and Isis 2302, an antisense inhibitor that targets intercellular adhesion molecule-1, which started Phase IIa studies for psoriasis late last year in a topical formulation.

Also slated for rapid development are two compounds under way with partner Elan Corp. plc, of Dublin, Ireland: Isis 104838, an antisense inhibitor of tumor necrosis factor-alpha (TNF-a), which is a factor in a number of inflammatory diseases, such as rheumatoid arthritis, and Isis 14803 for hepatitis C. The company expects to file an investigational new drug application for the IV formulation of Isis 104838 later this year and for the oral formulation in 2001. Trials are slated to start shortly for Isis 14803 using Elan's Medipad drug delivery technology.

Another compound, Isis 107248 for multiple sclerosis, should start clinical trials in 2001.

Deemed lower on the priority scale are Isis 2302 for ulcerative colitis and in preventing kidney transplant rejection, and Isis 5132, an antisense inhibitor of c-raf kinase, for breast and ovarian cancer.

Severely cut were funds for the company's antisense medicinal chemistry program, which developed third- and fourth-generation products.

Prompting this reorganization is the Phase III failure late last year of Isis 2302, which showed results drastically different from what investigators observed in an interim analysis. The drug failed to demonstrate a statistically significant difference from placebo in 300 patients with Crohn's disease. (See BioWorld Today, Dec. 16, 1999, p. 1.)

"This drug showed benefit in the first half of the trial and then showed significantly different results in every meaningful way in the second half of the trial," Crooke said. "We are looking at what factors may have been different between the two trials and we've eliminated several factors but have not eliminated others."

For instance, they found that women - almost by twice as much - responded to the drug more than men. Obese patients also showed more benefit. Different sites produced different results as well.

"We're analyzing the data to see what course we should take. No decision has been made for Isis 2302 in Crohn's disease," he said.

Despite the scale-backs, the company outlined an ambitious clinical development plan.

"We intend to advance our antisense drugs for at least two indications beyond Phase II, and demonstrate clinical safety and efficacy for at least two other indications," Crooke said. "We will start clinical trials of Isis 10483 and continue demonstrating antisense activity in animals. We want to complete at least one major Ibis deal, possibly within the next six months, and achieve oral bioavailability of Isis 104838 in animals."

Ibis is a drug delivery discovery platform that involves the creation of small molecules that bind to RNA.

Isis' stock (NASDAQ:ISIP) closed Tuesday at $7.687, down $1.