By Lisa Seachrist

Washington Editor

Following a series of regulatory setbacks, Zonagen Inc. is focusing its resources on its lead product candidates, Vasomax and Vasofem, and reducing expenditures by cutting nearly one-third of its staff.

On the advice of its board of directors, The Woodlands, Texas-based company decided to focus on its two sexual dysfunction products and put its other programs on the back burner. The move comes after the FDA delivered a non-approvable letter to Zonagen and its development partner, Schering-Plough Corp., for Vasomax and put a hold on all clinical studies with Vasomax and Vasofem.

"The good news is that we have $43.1 million in cash," said Scott Reding, CFO for Zonagen. "The directive from the board, however, is very clear - we need to focus our resources on the products with the greatest potential to deliver shareholder value."

Zonagen will look for outlicensing opportunities for its secondary programs such as its contraceptive products. In addition, the company has dismissed 15 employees who weren't essential to the Vasomax and Vasofem programs. Reding noted, "The personnel savings come from backing off other programs."

Vasomax is an immediate-release oral formulation of phentolamine mesylate, which is a short-term alpha-adrenergic receptor blocker that stimulates smooth muscle relaxation and causes vasodilation. It has been approved for 50 years, first as a treatment for hypertension and later for the diagnosis of certain tumors of the adrenal gland. Recently, however, phentolamine has been used off label as an injectable therapy for erectile dysfunction. Vasofem is a similar formulation to Vasomax being developed as a treatment for female sexual dysfunction.

Vasomax and Vasofem first ran into problems in May when Zonagen and Madison, N.J.-based Schering-Plough decided to forgo a scheduled FDA advisory panel hearing to review Vasomax. The companies, instead, accepted a non-approvable letter from the FDA and decided to amend their new drug application (NDA) once long-term studies of the drug had been completed. (See BioWorld Today, May 11, 1999, p. 1.)

That plan came to a halt in August when the agency placed a clinical hold on all studies with Vasomax and Vasofem as a result of an unusual side effect found in a long-term rat study of Vasomax. Results from the still-incomplete two-year rat study showed that some male rats were experiencing proliferation of brown fat - a form of fat stored by animals that hibernate. Because the study was designed to simulate the effects of taking Vasomax daily for a lifetime, the agency stopped all clinical trials of the drug with the exception of a fully enrolled 12-week study of the drug. (See BioWorld Today, August 11, 1999, p. 1.)

"I don't want to make light of a clinical hold - it's a serious matter," Reding said. "We suspect we will be able to work through these issues with the agency and get Vasomax back on track. We don't believe Vasomax poses any significant risk to humans."

The two-year rat study will end in November. Results from those studies, however, won't be available until sometime in the second quarter 2000. Because of the finding, the agency wants all 500 rats in the study to undergo 50 biopsies each to establish any association between brown fat proliferation and phentolamine mesylate.

"Vasomax is a lifestyle drug to treat a condition where there is already an approved therapy," Reding said. "As a result, the agency may be more focused on the risk-benefit calculation than if this were a life-threatening condition where there were no other therapies."

In the meantime, Reding said the company's other programs in contraception, urology and female health will take a back seat to efforts with Vasomax and Vasofem. Zonagen has begun to seek partners to outlicense those programs.

"Work will be slowed down significantly on these programs," Reding said. "We are already in discussions about licensing these programs."

Zonagen's stock (NASDAQ:ZONA) closed at $3.50 a share Tuesday, down 6.25 cents.