By Lisa Seachrist

Washington Editor

WASHINGTON — Alfacell Corp.'s lead drug candidate, Onconase, failed to show a survival benefit in patients with pancreatic cancer in a Phase III trial pitting the product in combination with tamoxifen against 5-fluorouracil.

The Bloomfield, N.J.-based company has decided to close the pancreatic cancer program and focus on completing the ongoing Phase III trial of the drug in malignant mesothelioma — cancer of the lining of the lung associated with asbestos exposure.

"We are very disappointed," said Gail Fraser, chief financial officer for Alfacell. "But just because it doesn't work for one cancer doesn't mean it won't work for another. Fortunately, our shareholders have been very supportive."

The company has $5 million in cash, which Fraser said should last until the end of fiscal 1999 next June 30. However, she noted finances at the company are going to be "very tight" as they try to complete enrollment for the mesothelioma trial and generate preliminary results before their cash runs out.

The company's stock (NASDAQ:ACEL) plummeted $1.781 Wednesday to close at $0.781, a 69 percent drop.

Onconase is an RNase — an enzyme that degrades RNA — purified from frog eggs. The company was testing the product to see if patients treated with Onconase and the breast cancer drug tamoxifen were more likely to survive than patients treated with 5-fluorouracil. In addition, the 200-patient trial also was to look at whether Onconase-treated patients enjoyed a better quality of life.

However, preliminary analysis showed the drug failed to meet its survival endpoint. The company didn't examine the data for the secondary endpoint before deciding to scuttle the program. Instead, Fraser said the company decided to focus on the mesothelioma trial, which has 80 of the required 150 patients enrolled.

Fraser said Alfacell plans to have enrollment completed by the end of the year, with preliminary data reported in April or May 1999.

In addition to mesothelioma, the company believes Onconase could be developed as a treatment for HIV. In vitro studies of the drug conducted in collaboration with the National Institutes of Health (NIH) have shown it inhibits production of HIV-1 in several persistently infected human cell lines by 99 percent. The drug preferentially degraded viral RNA while not affecting normal cellular ribosomal RNA and messenger RNA.

"We can't develop Onconase as a treatment for AIDS," Fraser said. "But the early results are so promising that we would like to find a partner to develop it."

Researchers at NIH also are considering testing the drug as a treatment for brain cancer, Fraser said.

"This drug is very well tolerated mainly because it doesn't cause myelosuppression," Fraser said. "It appears to work by using a variety of mechanisms. Even though we are reporting the failure of a Phase III trial, we are hopeful about this drug's ultimate success." *