By Lisa Seachrist

Washington Editor

WASHINGTON — Corporate restructuring has led Astra AB to re-examine development of Allelix Biopharmaceuticals Inc.'s recombinant parathyroid hormone for the treatment of osteoporosis.

Following Astra's June decision to buy out Merck & Co. Inc.'s share of their joint venture, Astra Merck Inc., Astra is re-evaluating all of its late stage clinical programs, including Allelix's ALX1-11. (See BioWorld Today, June 22, 1998, p. 1.)

Astra, of Sodertalje, Sweden, is in the process of determining whether it will continue to develop the drug, said Jerry Ormiston, manager of investor relations for Mississauga, Ontario-based Allelix.

"It's not surprising that they would be examining their drug development programs," he said. "For us, that is an important consideration for our shareholders to be aware of." Allelix's stock (TSE/ME: AXB) dropped 40 percent on the news, trading late Friday afternoon at $C3.65, down C$2.40.

Astra listed options for ALX1-11 that include accelerating the Phase III program; developing new delivery options for the drug; or scrapping the program and returning the responsibility for the development of the drug to Allelix.

Allelix President and CEO Graham Strachan told analysts in a conference call there is a real possibility that the program will be abandoned. Astra has promised to render a decision to Allelix in late September.

Astra agreed to purchase the rights in June 1996 to develop and market ALX1-11, recombinant parathyroid hormone, for the treatment of osteoporosis. It paid $C50 million (US$31.7 million currently) in license fees, milestone payments and annual development support, and Strachan said Astra has paid Allelix $C25 million over the last year.

However, with the takeover of Astra Merck, Astra will ante up $4.4 billion at the very least to Merck by 2008. As a result, all clinical programs by Astra and the joint venture are being re-evaluated, as Astra formulates its long-term development strategy.

Phase II Shows Dose-Related Effect On Bone Density

Strachan said Allelix, which navigated ALX1-11 through Phase I and Phase II trials, has been as frustrated as investors by Astra's slow pace in developing the drug further. The Phase II results — central to Astra's decision to license the drug — will be presented in December at a scientific meeting. Those data show a significant, dose-dependent effect of ALX1-11 on bone mineral density after one year of treatment in patients suffering from postmenopausal osteoporosis.

In addition to ALX1-11, Allelix is developing ALX-0600, a recombinant form of peptide-hormone GLP-2 (glucagon-like peptide-2), as a treatment for small bowel disorder. The peptide-hormone stimulates the growth of the lining of the small intestine, allowing patients to digest food. ALX-0600 is scheduled to enter the clinic later this year or early next year.

The company also is preparing for Phase II trials later this year of ALX-0636, a small molecule drug to treat migraine headaches.

Allelix is in partnership with Eli Lilly & Co., of Indianapolis, to develop compounds that act at various excitatory amino acid receptors. Strachan said the company also is in partnering discussions with pharmaceutical companies for the development of ALX-5407 to treat schizophrenia.

In order to keep the burn rate down in the event the Astra collaboration falls through, Strachan said the company will place some of its early neurologic products on the back burner and reduce the number of employees. With this plan, he said, the company should have $20 million cash going into 2000. *