By Jim Shrine

Cell Therapeutics Inc. officials said there was "only upside" from a Phase II/III study of lisofylline in acute lung injury, but investors deemed the trial failure as more significant by taking nearly half the value out of the company's stock on Friday.

The Seattle-based company said a data safety monitoring board recommended stopping the trial for acute lung injury and acute respiratory distress syndrome (ARDS) after seeing no positive trends toward improvement in survival 28 days after treatment. The anti-inflammatory compound failed in a separate Phase III trial in March 1998 and is in two other pivotal studies, with results from one expected in August.

Cell Therapeutics' stock (NASDAQ:CTIC) lost $2.375 Friday, or 48 percent, to close at $2.562. It had gained 93.75 cents Thursday, in advance of what many believed would be positive findings from the acute lung injury trial.

James Bianco, president and CEO, said the focus for lisofylline has always been for oncology indications, and the company never would have pursued lung injury had it not been for the interest from ARDSnet, a clinical trials network funded through the National Heart, Lung and Blood Institute (NHLBI).

"We wouldn't have done this if the NHLBI wasn't paying for it," Bianco said. "We saw no downside to it - and there was a lot of biology behind it. Clearly, if the drug were active in this indication it would shape the company in a totally different direction."

Cell Therapeutics officials haven't seen the trial data, so they couldn't comment about specific results, Bianco said. But he and investigators were expecting positive results based on data released March 10 from the first 180 patients in the 230-patient study. At that time, 28-day mortality for the drug and placebo groups was 28 percent, compared to the 33 percent to 35 percent rate seen with other drugs tested.

At that point, investigators switched all remaining patients to small-breath ventilation, which had shown in that study to date and in another 600 patients on ventilation that it improves mortality rates compared to large-breath ventilation (30 percent mortality vs. 40 percent mortality).

But the drug group did not beat the placebo by the required two percentage points (p=0.157).

"This has no impact on oncology indications," Bianco said, adding that it's impact on the lisofylline collaboration with Johnson & Johnson is "minimal." The New Brunswick, N.J.-based pharmaceutical company has an option to regain rights to lisofylline, and probably will make its decision, he said, based on results from the ongoing Phase III trial of the drug in preventing serious infections in chemotherapy-treated acute myelogenous leukemia patients. Those results are expected in August.

Results from another pivotal study - in bone marrow transplantations involving unrelated donors - are expected by the end of the year, Bianco said. A trial testing the compounds' ability to reduce neutropenia-related infections and mortality in transplants involving HLA-identical donors failed last year. Lisofylline also is in a Phase IIa study for preventing or reducing mucositis in patients with head and neck cancers, who receive chemotherapy or radiation treatment.

Bianco pointed out that Cell Therapeutics has a deeper pipeline now than previously, which is shown by the fact that 70 percent of its budget last year went toward lisofylline. Only 22 percent of it is earmarked for that compound this year. The company has three other drugs in development: Apra is being investigated in a Phase II study in refractory prostate cancer patients and a Phase II study in soft tissue sarcomas; PG-TXL, a water-soluble form of paclitaxel that has potential as a chemotherapy delivery platform, is expected to enter the clinic this year; and SC-7, a novel angiogenesis inhibitor, remains in development.

Cell Therapeutics posted a net loss of about $24 million in 1998. Bianco said the company expects that rate to go down this year through a collaboration on Apra or PG-TXL. The company had about $40.5 million in cash on March 31, and 15.5 million shares outstanding.