Interferon Staff Cut 25 Percent; CEO Calls Setbacks Temporary

Interferon Staff Cut 25 Percent; CEO Calls Setbacks Temporary

By Mary Welch

In reaction to the FDA's opinion that Interferon Sciences needs another Phase III trial before it applies for approval of Alferon N Injection for HIV-infected patients, the New Brunswick, N.J., company's stock plummeted 69 percent and a reorganization cut staff by 25 percent.

But CEO Lawrence Gordon views it all as a temporary setback and believes FDA approval can still come by the end of the year.

"I wasn't surprised that our stock went down substantially but when the dust settles and you compare where our company is with others, we've had a lot of successes. We have an approved drug, which is doing quite well," Gordon said Friday.

Interferon's stock (NASDAQ:IFSC) dropped from $7.062 to $2.156 April 2 when news of the Phase III HIV study was disclosed. Its shares ended last week at $1.75, up $0.093.

The job losses were mostly in manufacturing. "We made the decision to suspend manufacturing," Gordon said. "We had built up a lot of inventory in anticipation of approval and we have a reasonable amount of inventory for the foreseeable future." Interferon's staff now numbers about 100.

Alferon is the company's lead product. It was approved by the FDA in 1989 for genital warts. The drug netted sales of about $3 million last year. A naturally derived alpha interferon, Alferon is a specific blend of proteins containing many different molecular species of alpha interferon. In addition to testing Alferon for HIV, the drug is being evaluated in Phase III trials for hepatitis C.

Primary Efficacy Goal Not Proved In HIV

In the double-blind, placebo-controlled trial Phase III trial with HIV patients, the FDA ruled the results were insufficient to file for approval. The agency judged that while benefits were found in HIV patients at various points during the trial, the drug's primary efficacy variable (reduction in viral load) was not proven at the end. The government recommended an additional trial to further evaluate Alferon's potency in treating HIV.

"The FDA found that it was biologically active and, in that way, the study was a success," said Gordon. "We believe, in fact, that when we repeat it in combination with other therapies, it will be approved by the FDA — maybe by the end of the year.

"This drug will be highly marketable. When you compare our drug to the placebo, the status was that it was statistically significant at different time points during the study. It was not at the end. We didn't expect the placebo to have a positive response," he said.

Interferon faced another setback when testing Alferon against the hepatitis C virus in Phase III trials. Using only half of the patients enrolled in the interim study, the results confirmed that Alferon was effective in treating hepatitis C. However, it was not superior to the control treatment, Intron A, which was the goal of the trial. Intron A is sold by Schering-Plough Corp. of Madison, N.J. The drug, developed by Biogen Inc., of Cambridge, Mass., is a recombinant interferon alpha-2b.

"We need to see the other 170 patients and we'll be doing that by the end of the second quarter," Gordon said. "We have to look at safety difference, differences in biological responses, differences in genotypes. We don't know. We'll have a better idea of where we are in the third quarter."

At that time, the company, armed with complete results from the hepatitis C study, will meet with the FDA to schedule an assessment of the data for a possible filing.

"The thing is," Gordon said, " we may have an approval for both by the end of the year. This is a drug that has utility. It has vast worldwide use. The market is huge." *