By Jim Shrine

LXR Biotechnology Inc. had much of its fate riding on the preclinical results of the heart attack drug Elirex, which failed to reduce infarct size in three of four studies. That result forced the company to seek the best way to close out operations.

¿We feel fortunate to have been part of this market for as long as we have, and we would have loved to have taken these compounds to the next stage, to reach clinical products and products on the market,¿ LXR President and CEO Paul Hastings said. ¿But it didn¿t happen.¿

The Richmond, Calif., company put cost-cutting measures in place last summer and raised a little money since then, so it could stretch its cash far enough to get the Elirex results. Had they been favorable, LXR would have been in a much better position to seek financing and discuss partnerships, Hastings said.

The company¿s stock (AMEX:LXR) lost about 64 percent of its value Friday, closing at 25 cents, down 43.75 cents per share. LXR has about 30 million shares outstanding, giving it a market capitalization of about $7.5 million. In regulatory filings, the company said it had about $3.5 million in cash at the end of 1998, enough to last until the middle of the third quarter.

¿We will sell the company, essentially,¿ Hastings said. ¿We will, over the next six months, or however long it takes, let everyone know what good early-stage products we have, and look for strategic partners to purchase those programs. The key is to be as flexible as possible. If there is a buyer who would like to buy the company, that is what our goal would be.¿

In addition to Elirex, LXR is or was developing CP-Cardiosol for use in heart bypass surgery and HK-Cardiosol as a heart preservation solution; Secreted Apoptosis Regulating Proteins (SARPs); Lexirin, an anti-apoptotic mixture extracted from soy protein, for gastrointestinal disorders; and, to lesser degrees, a urine DNA analysis technology; a lysophosphatidic acid (LPA) assay; the Bak (Bcl-2 homologous antagonist/killer) gene; research around the Fas gene; apoptosis drug screening; scanning laser digital-imaging technology; and the Maspin protein, as a metastatic prognostic cancer marker.

LXR decided last year to focus most of its resources on Elirex, which is designed to prevent or reduce tissue damage following heart attack and stroke. Elirex, the original formulation, contained a complex mixture of phospholipids. The company then identified certain LPA analogues as individual components with the most anti-apoptotic activity. They were tested in four animal models of heart attack, as well as ischemia/reperfusion models, to compare to the original formulation.

The plan was to confirm earlier positive results and pick a candidate for clinical development. But three of four studies suggested Elirex did not reduce infarct size. The fourth showed a 33 percent reduction in infarct size in a pretreatment model of ischemia/reperfusion.

¿We did not meet the objectives in the particular models we worked in,¿ Hastings said. ¿We failed to meet the milestones we set to the market. It made us much too early to be a late-stage company, and much too late to be an early-stage company.¿

Hastings said the company still believes in the technology, but that result pushed LXR too far back in the development stage, while expectations were the company would be in mid- to late-stage development at this point. Thus, financing opportunities would not be available.

Last June, LXR reduced its work force from about 60 people to 30, and had about 25 employees before the Elirex result. The plan is to reduce significantly again, leaving only a ¿handful of people who will keep these programs on track with outside collaborators.¿

¿The message right now,¿ Hastings said, ¿is I¿m interested in talking to people about what they feel the value of LXR is, and I¿d love to see these products reach the market. I think there are some tremendous opportunities.¿

LXR has an approved investigational device exemption in hand for HK-Cardiosol, and recently submitted an amended investigational new drug application on CP-Cardiosol. A Phase I study has been completed on Lexirin, and scientists from various institutions ¿ as well as the gene therapy division of Collegeville, Pa.-based Rhone-Poulenc Rorer ¿ are researching SARPs.

LXR was incorporated in April 1992 and taken public by D. Blech & Co. in May 1994, with the sale of 2.5 million shares at $4.50 each. D. Blech & Co. and its principal, David Blech, were involved in taking a number of companies public in that time period, but later were the subject of securities fraud allegations. LXR recently settled, in principle, class-action lawsuits that alleged misrepresentation around that initial offering, and manipulation of share prices after the offering.

Hastings said LXR was affected years ago by the relationship with Blech, since it was difficult to raise money without significantly diluting the stock. But he said that had no real bearing as time went on, and the company¿s technology moved forward.

¿I¿ll make no excuses for the fact that LXR is where it is today,¿ he said. ¿The fact of the matter is that a stand-alone company needs Phase III clinical programs [in today¿s market]. If you have interesting science and interesting early research, but not a Phase II product for a large market ¿ or one that will show people a nice earnings-per-share scenario and future growth ¿ then the market isn¿t interested.

¿When you¿re in a situation like that, and have a program like Elirex that doesn¿t make preclinical milestones, the market reacts to that,¿ Hastings said. ¿It¿s a pretty simple lesson, and it¿s unfortunate. A lot of good people and a lot of hard work went into this.¿ n