By Jennifer Van Brunt

Editor

There are literally hundreds of biotechnology drugs in clinical development today. Estimates range all over the place, but with about 300 products in late-stage development (i.e., Phase II/III or Phase III trials), it's possible that there could be at least twice or even thrice that many in earlier development stages.

Historically, only a small fraction of those potential products that start out being tested for safety in humans ever make it to the marketplace. And in between lies the clinical trial obstacle course that many a biotechnology company has had to negotiate over the last decade. Some biotech firms have been successful at this endeavor — for instance, seven out of the 10 new biologic drugs approved by the FDA in 1997 were developed with recombinant DNA technology — but many have stumbled along the way. And when they trip, the whole world knows about it.

The news of a product failure can and almost always does drive down a company's stock price as investors flee from perceived disaster. However, what is interpreted as a downright failure may not be the drug's total lack of efficacy but rather the inability of the product to outperform an approved drug that has been adopted as the standard of care for that particular disease indication. Or, in even trickier circumstances, the placebo effect can be so strong that it's impossible for the sponsoring company to ascertain whether its drug candidate is actually working at all.

Not since 1994 has the biotech industry had such a long string of product blow-ups. That was the infamous "year of the placebo," when one promising drug candidate after another crashed in the clinic. Who can forget Synergen Inc.'s Antril for sepsis; Gensia Inc.'s Protara for heart attacks; Telios Pharmaceuticals Inc.'s Argidene for diabetic foot ulcers; or Regeneron Pharmaceuticals Inc.'s ciliary neurotrophic factor for amyotrophic lateral sclerosis (Lou Gehrig's disease)? After these stunning setbacks, fortunately, biotech drugs in development managed to hold a fairly even course over the next several years. There were certainly clinical trial failures along the way, as there were successes. But the failures didn't mount up one after the other. That all changed in 1997 — again — when investors and the press were shocked day after day with negative clinical news on what had been promising biotech drugs.

Especially in the spring of 1997, the bad news seemed to be on an endless roll. March, for instance, was filled with clinical disappointments for biotech products in development. Alkermes Inc. (NASDAQ:ALKS) reported that its drug delivery agent RMP-7, carrying the chemotherapeutic agent carboplatin, failed to meet its primary endpoint (time to tumor progression) in treating recurrent malignant brain tumors. Investors expressed their disappointment by pulling the rug out from under the stock, which fell by 31 percent on March 31.

Alkermes' Cambridge neighbor OraVax Inc. (NASDAQ:ORVX) also suffered from lack of statistical strength on its lead product, HNK20, for treating respiratory syncytial virus infection in high-risk infants. OraVax's product, a nose drop formulation of a monoclonal antibody to the virus, failed its primary endpoint in Phase III clinical trials. When the results were announced March 19, OraVax's stock dropped by 46 percent. Shortly thereafter, OraVax announced a company-wide restructuring — including the elimination of 25 percent of its staff — in order to conserve cash and focus its efforts on completing the development of HNK20.

The stock of a third Cambridge-based biotech firm, ImmunoGen Inc. (NASDAQ:IMNG), lost close to 38 percent in value on March 18, when the company announced that it was abandoning its lead drug program. Here, too, the product had failed to exhibit any benefit to patients in a Phase III trial. Oncolysin B, an immunoconjugate consisting of a monoclonal antibody linked to a blocked version of the plant toxin ricin, proved equivocal to the control in treating non-Hodgkin's B cell lymphoma patients following autologous bone marrow transplants. ImmunoGen, which has been working on this product since the end of 1988, simply doesn't have the financial resources to carry Oncolysin B any further.

And in April, Alliance Pharmaceutical Corp. (NASDAQ:ALLP) and Scios Inc. (NASDAQ:SCIO) both took a fall. For San Diego-based Alliance, the bad news came with the realization of a perplexing anomaly in the Phase III clinical trials of its liquid oxygen carrier LiquiVent. The company was testing the product as a treatment for acute respiratory distress syndrome in infants and children. But, unexpectedly, the death rate among patients in the control group was far lower than the normal 30 percent — in the single digits, according to the company. Since the primary endpoint of this study was reduction in mortality, this low incidence of death threw a wrench into the works. Investors pummeled the stock, driving its price down 39 percent in heavy volume on the news. And since then, Alliance has lost its development partner for this product: Hoechst Marion Roussel Inc., of Kansas City, Mo., ended the collaboration in December, citing the increased time lines (and financing) this setback had caused. Nevertheless, Alliance resolved the dilemma and is back in the clinic with the product; it initiated Phase II trials in adults in December.

Scios, too, got a rude message when it announced that its lead product, Auriculin, had failed — again — to achieve its primary endpoint (dialysis-free survival) in Phase III trials. Scios, of Mountain View, Calif., suspended the study after this interim analysis of the results, stating the low probability that a positive outcome could be achieved if the trial were continued. This news sent investors scrambling to dump the stock, which lost 30 percent in value on the April 2 announcement.

Auriculin (atrial natriuretic peptide), a naturally occurring hormone produced in the atrium of the heart and reported to have the ability to regulate blood flow through the kidneys, had been in development for 14 years. The product had already suffered a major blow in 1995 when it failed a Phase III trial for the treatment of acute renal failure. But at the time, a small subset of patients in the trial — those with oliguric acute renal failure (abnormally low urine output) — seemed to benefit from the therapy. So, Scios and its partner Genentech Inc., of nearby South San Francisco, decided to forge head with a new clinical trial in just these patients. Now the product is dead.

Other Casualties

The casualty list goes on. The following companies — among others — also suffered from unfavorable clinical trial results and high-profile investor reactions in 1997.

* Alpha-Beta Technology Inc., of Worcester, Mass., reported that its non-antibiotic glucose polymer Betafectin PGG Glucan did not achieve overall statistical significance in its primary endpoint (reduction in incidence of patients who develop serious infections 30 days after surgery in colorectal surgeries, two-thirds of the patients enrolled in the trial) — even though it did achieve statistical significance in prospectively defined non-colorectal surgery patients. The stock (NASDAQ:ABTI) dropped 43 percent Aug. 4. Now, however, the company is back in the clinic, trying the drug in patients who have had upper gastrointestinal tract surgery.

* AutoImmune Inc. saw both its lead products bomb in the span of just a few weeks last spring. The Lexington, Mass., company (NASDAQ:AIMM) had been developing its products based on the concept of oral tolerance (in which the body can and does ingest foreign proteins without mounting a broad-based immune attack against them). The first to hit the news was the firm's lead product, Myloral, for treating multiple sclerosis, which failed to outperform the placebo in a 500-patient, two-year Phase III trial. AutoImmune's stock (NASDAQ:AIMM) dropped 67 percent in reaction to the April 21 announcement. With the future of Myloral in doubt, AutoImmune initiated measures to reduce its staff by about one-third, with all the layoffs directly related to the Myloral program.

The second punch came just weeks later, when AutoImmune discovered that its second product, Colloral (also based on oral tolerance technology), also had failed to outperform the placebo in Phase II trials in rheumatoid arthritis. That news, on May 12, sank the firm's stock to a new 52-week low ($2.437 per share), leading some analysts to express doubts about the oral tolerance technology per se as well as the future of the company itself.

* BioCryst Pharmaceuticals Inc., of Birmingham, Ala., in late September became the latest in a long list of companies with products that have failed to affect psoriasis. The company abandoned attempts to develop a topical formulation of BCX-34 (a small molecule inhibitor of purine nucleoside phosphorylase) for treating not only psoriasis but also cutaneous T cell lymphoma when the drug failed to beat the placebo in Phase III trials in both indications. The stock (NASDAQ:BCRX) dropped 34 percent on the news Sept. 26.

* Cambridge NeuroScience Inc., of Cambridge, Mass., took another hit when it reported that its small molecule drug Cerestat (an N-Methyl-D-Aspartate ion channel blocker) had failed to provide sufficient evidence that it would have a positive clinical impact on traumatic brain injury in a Phase III clinical trial. The company's stock (NASDAQ:CNSI) dropped 44 percent on Sept. 16. It had already suffered a 60 percent drop in June, when the company temporarily suspended enrollment in another Cerestat Phase III trial, this one for treating stroke. Cambridge NeuroScience and its partner Boehringer Ingelheim GmbH, of Ingelheim, Germany, announced in mid-December that further analysis of the stroke data did not justify continued clinical development of the product for this indication.

* Connetics Corp. (NASDAQ:CNCT) announced that recombinant human gamma interferon (a product it licensed from Genentech Inc. in 1995) did not perform up to expectations in a Phase III trial for treating atopic dermatitis. The stock dropped 45 percent Aug. 27, closing at $5.062 per share as Palo Alto, Calif.-based Connetics announced it was dropping product development because it had failed to show an acceptable therapeutic response with respect to the primary endpoint.

* Cor Therapeutics Inc.'s platelet aggregation inhibitor Integrilin got rebuffed by an FDA advisory committee on Feb. 28, due to insufficiently robust clinical trial data on its ability as an adjunct therapy to prevent acute cardiac complications in patients undergoing angioplasty. The stock (NASDAQ:CORR) dropped 23 percent on the news. It shed another 10 percent on March 25, when the South San Francisco company received a formal not-approvable letter from the FDA. The company submitted more clinical trial data to the agency, but it was still not sufficient. In January 1998, an FDA advisory committee was finally satisfied with the strength of the data to support use of Integrilin in patients undergoing angioplasty, but it declined to recommend the drug on the basis of results from a single pivotal trial in the much broader settings of unstable angina and non-Q-wave myocardial infarction. Investors trashed the stock once again, sending it down another 53 percent on Jan. 29, 1998.

* Neurobiological Technologies Inc. reported on Jan. 3 that its corticotropin-releasing factor failed to demonstrate a statistically significant effect in Phase II trials for rheumatoid arthritis. The Richmond, Calif., firm's stock (NASDAQ:NTII) dropped 34 percent in response; the company also said at the time that it would not pursue further development of this product without a partner.

* Neurogen Corp. (NASDAQ:NRGN) and its development partner Pfizer, of New York, had to halt Phase I trials of the potential obesity drug NGD 95-1 Dec. 8 because some of the patients exhibited elevated levels of several liver enzymes. Although those patients were asymptomatic, the news was received poorly by investors, who drove shares of the Branford, Conn., company's stock down by 33 percent. The product is an orally active small molecule antagonist of neuropeptide Y (NPY) receptors. NPY, a chemical messenger in the brain, is strongly linked to appetite and is thought to be the most potent known stimulator of eating in animals. The partners are now determining whether the elevated liver enzymes are a drug-related phenomenon.

* Regeneron Pharmaceuticals (NASDAQ:REGN) lost yet another of its lead products when it reported Jan. 10 that BDNF (recombinant brain-derived neurotrophic factor) had failed to demonstrate efficacy in treating amyotrophic lateral sclerosis in Phase III trials. Investors abandoned the stock, causing it to drop by 43 percent.

* Xoma Corp. (NASDAQ:XOMA) and its corporate partner Pfizer Inc. (NYSE:PFE) dropped further development in the U.S. of Xoma's first-generation drug E5 for treating Gram-negative sepsis. Xoma and Pfizer reported on April 24 that the results of the 1,000-patient Phase III U.S. trial of E5 (a monoclonal antibody) did not support continued development of the product — one of the last of biotech's first-generation anti-sepsis drugs to fail in the clinic (an event that has occurred for one product after another since the mid-1980s). In fact, Gram-negative sepsis remains to this day an elusive drug-development target; as such, it's bound to lure a new round of clinical investigations in the future — with a new set of unique strategies.

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