By Mary Welch

The Liposome Co. "has a little color in its cheeks."

That's how Alex Zisson, an analyst with Hambrecht & Quist LLC, in New York, described the Princeton, N.J.-company, which is showing signs of recovery a year after suffering a Phase III blow-up of Ventus, its treatment of acute respiratory distress syndrome. The clinical trial setback sent the firm's stock plummeting 61 percent. (See BioWorld Today, June 26, 1997, p. 1.)

The Liposome Co.'s stock has bounced around between $4 and $9 in the last 52 weeks. The day of the Phase III failure, its stock closed at $9.56, down a whopping $15.25. Its shares (NASDAQ:LIPO) ended Tuesday at $5.125, down $0.25.

While the stock is still on the low side, Zisson is optimistic.

"They had a great quarter," he observed. "A lot of people, analysts, had written them off. They came close to breaking even this quarter, which was a huge shock to people on Wall Street," he said, adding, "I came in low at $0.12 [net loss per share]. And that wasn't even close. They came in with much better numbers than anyone ever thought."

Indeed, the Princeton, N.J., company is expecting to achieve profitability next year, something even Zisson admits few would have believed just months ago.

The Liposome Co. posted second-quarter 1998 revenues of $20.2 million compared with $16.7 million for the same period last year, which is an increase of 21 percent. Net loss for the second quarter of 1998 was $847,000, or $0.02 per share — almost miniscule compared with a net loss of $8.6 million, or $0.23 per share, for the same period last year.

For the first six months of 1998, the company posted a net loss of $5.9 million, or $0.16 per share, compared with a net loss of $13 million, or $0.36 per share for the first six months of 1997 — an improvement of $7.1 million, or $0.20 per share.

Total revenues for the first two quarters of 1998 were $37.3 million compared with $32.5 million over the same period last year — an increase of 15 percent.

Abelcet Sales Up 26 Percent In 2Q

Lawrence Hoffman, chief financial officer, attributed the company's improving health to several factors.

"We have an aggressive sales force and they are working very hard to get a dominant share for Abelcet," he said. "We have 40 persons in the U.S. alone and we've taken it into several new markets including Canada last year, and we're expanding in Europe. We're working very hard with our partner Wyeth-Ayerst [International Inc., of Radnor, Pa.] to get more local sales in France and Italy, and with Laboratorias Esteve SA, of Barcelona, Spain, to do the same in Portugal and Spain." Wyeth-Ayerst is a subsidiary of American Home Products Corp., of Madison, N.J.

Abelcet (amphotericin B lipid complex injection) is approved in 19 countries and marketed in the U.S. for severe systemic fungal infections in patients who are refractory to or intolerant of conventional therapy.

Second-quarter sales of Abelcet rose by 26 percent to $19.2 million from $15.2 million in the second quarter 1997. U.S. sales accounted for $15.3 million in the second quarter of 1998, exceeding last year's figures by $2.1 million.

Worldwide sales of Abelcet for the first half of 1998 were $35.2 million, or 19 percent higher than the comparable period last year. Sales in the U.S. for the first half of this year exceeded sales for the same two quarters last year by $2.6 million while international sales increased by $3 million.

"Some had felt that sales growth of Abelcet would stop or there would be a price war," said Zisson. "But it seems the anti-fungal market is strong and converting to a liposomal format."

"Pricing has stabilized and we don't expect any price wars like we had in 1997. That has helped," Hoffman said, adding, "In fact, we've been able to increase our price for Abelcet in certain facets of our market effective July 1."

Cost Reductions Implemented

Hoffman also observed, "We have initiated cost controls and it has helped in reducing our losses." One move was to switch the manufacturing of Abelcet from its Princeton, N.J., plant to a larger one in Indianapolis, a move that has lowered unit costs.

The Indianapolis plant also is doing contract manufacturing work for Astra AB, of Sodertalje, Sweden. This revenue should start showing up on the profit line in the fourth quarter, Hoffman said.

Other contract manufacturing opportunities also are being sought.

"One knock the company has always had is that whatever revenue they get, they spend," said Zisson. "It looks like they're getting some cost-cutting controls in place."

Also on the revenue line is a stream of royalty payments from NexStar Pharmaceuticals Inc., of Boulder, Colo., that started in January and will continue through the year 2013 for what Hoffman said is "a settlement from patent litigation."

The Liposome Co. and NeXstar started a patent fight in 1992 over ownership of liposome drug delivery technologies. In August 1997, the two companies reached a settlement in connection with all their outstanding patent litigation involving worldwide production and sales of AmBisome, NeXstar's liposomal formulation of amphotericin B, which competes with Abelcet.

Among the Liposome Co.'s drug development projects is Evacet (formerly TLC D-99), a liposomal form of doxorubicin, for metastatic breast cancer. The company intends to file a new drug application with the FDA in the fourth quarter of this year.

In addition, Liposome Co. expects to file an investigational new drug application for evaluation of TLC ELL-12, a liposomal ether lipid that can be used to treat a number of cancers. The company expects to start Phase I trials by year's end.

"They are now gaining visibility with the FDA on Evacet and it's perfect timing for Evacet," Zisson said. "They're continuing to grow Abelcet. The trials were good on Evacet. They've got plenty of cash to bring TLC ELL-12 through trials.

"It looks like the Liposome Co. is getting ready to turn from a one-product company and move to being a complete and profitable company." *