By Lisa Seachrist

Washington Editor

WASHINGTON - Following the FDA's denial of approval for Ergoset, Johnson & Johnson (J&J) pulled out of a $40 million development collaboration on the diabetes drug with Ergo Sciences Corp.

Boston-based Ergo was informed of the decision just one day after J&J announced that it was cutting 4,100 jobs, or approximately 4 percent of its work force. This is the second diabetes collaboration J&J has terminated this year.

"It's too early at this point to say what we are going to do next," said Lisa DiCenza, spokeswoman for Ergo. "We are still evaluating our options."

As of Sept. 30, Ergo had $37 million in cash and cash equivalents. DiCenza said that the company predicts that level of cash will see the company through 1999.

Ergo and J&J entered into the collaborative development agreement for Ergoset in February. J&J paid Ergo a $10 million license fee and purchased $10 million in common stock. Further milestones could have made the deal worth an additional $20 million for Ergo.

A week later, J&J said it was ending its diabetes collaboration with Amylin Pharmaceuticals Inc., of San Diego, for the development of pramlintide, a synthetic analogue of the hormone amylin. The news sent Amylin's stock down 46 percent. (See BioWorld Today, Feb. 25, 1998, p. 1, and March 3, 1998, p. 1.)

However, in May, Ergoset received its first regulatory setback when an FDA advisory panel decided there was insufficient evidence to recommend approval of the drug for the treatment of Type II diabetes. The panel's refusal sent Ergo's stock into a free fall. The company's shares closed at $6.25 per share, down 55 percent.

Ergoset is the lead compound in Ergo's Neuroendocrine Resetting Therapy (NRT) program, based on research showing that glucose and lipid metabolism may be normalized by controlling the daily activity patterns of neurotransmitters. The company said at the time that, because Ergoset works through the central nervous system, the panel had difficulty understanding the scientific strategy behind the drug. (See BioWorld Today, May 18, 1998, p. 1.)

Taken orally once a day at a specific time, Ergoset is a fast-release formulation of bromocriptine, a dopamine-receptor agonist currently approved for the treatment of Parkinson's disease in a different formulation.

On Nov. 20, the FDA sent Ergo an non-approvable letter, citing an unfavorable risk-benefit ratio for patients. Ronald Abrahams, chairman, CEO and president, told BioWorld Today the company was considering an appeal of the decision, as well as examining the type of clinical trial the FDA may wish the company to undertake next. Ergo has hired an FDA regulatory consultant to help officials explore the company's options. (See BioWorld Today, Nov. 24, 1998, p. 1.)

DiCenza said the company will decide during the next several weeks how it will proceed with Ergoset's development. Ergo's stock (NASDAQ:ERGO) closed Monday at $1, down $0.281. n

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