By Debbie Strickland

After receiving a second not-approvable letter from the FDA, Matrix Pharmaceutical Inc. has halted indefinitely U.S. development of AccuSite (fluorouracil/epinephrine) Injectable Gel, a therapy for genital warts that has been approved in three European countries.

AccuSite is a biodegradable gel containing fluorouracil (5-FU) — a standard chemotherapeutic agent. AccuSite is injected directly into the wart, where it provides a sustained release of the drug. The company has tested the product in more than 2,000 patients with genital warts.

Matrix intends to meet with the FDA to find out whether existing trial data can resolve the matter, but is "not in a position to fund further clinical studies for this indication should the agency determine that such studies would be required for approval in the U.S.," said James Glynn, chief operating officer, chief financial officer and interim CEO, in a prepared statement.

The news sent Matrix's shares (NASDAQ:MATX) tumbling 29 percent to $4.875, a loss of $2 per share.

Cancer Drug Takes Center Stage

While AccuSite's European regulatory and marketing activities will continue, Matrix's focus now shifts to its cancer programs.

Matrix's IntraDose Injectable Gel is in multinational Phase III studies for the treatment of head and neck cancer and other accessible tumors, and in multinational Phase II trials in liver cancer. MPI 5020, a locally injected gel designed to enhance the cytotoxic effects of radiation therapy, is in a Phase I/II trial in recurrent and metastatic breast cancer.

Analysts David Stone and Felicia Reed of Cowen & Co., in Boston, are "neutral" on the company's shares, expecting the price to "languish pending Phase III results of IntraDose for cancer in 1998."

If approved, IntraDose could generate revenues of about $155 million by 2001, according to the analysts.

As of June 30, Matrix had $95.9 million in cash, cash equivalents and investments — enough to fund operations for several years, according to Peter Dworkin, senior director of investor relations and corporate communications. The company reported a net loss of $19.53 million for the first half of 1997.

The three-page FDA letter on AccuSite cited the same issue that was raised in the first letter, sent in December 1996: the persistence of induration — a bump-like thickening or swelling — at the site of injection in some patients. The agency said the persistence of induration, although it typically heals naturally, may be an indicator of localized inflammation.

FDA officials, however, "have not spelled out to us why local inflammation would be a significant safety issue," Dworkin said.

A majority of AccuSite patients have reported induration, but in almost all cases, the condition resolved without medical intervention, according to Dworkin. Persistence was highly variable.

"FDA reviewers in the Dermatologic and Dental Products Division evidently believe that genital warts is neither a disabling nor life-threatening condition," said Glynn, "and consequently, that the potential benefits of treatment with AccuSite do not outweigh side-effect concerns.

"It appears that this conclusion will be difficult to overcome, and in all likelihood it is not prudent for our company to invest significant additional resources in the AccuSite program, given the progress we have made in pursuing this technology in life-threatening cancer indications."

AccuSite achieved a 78 percent complete response rate in registration-directed clinical trials. The company had originally planned for a second quarter 1997 U.S. launch.

The product is approved in the United Kingdom (where it is on the market), Ireland and the Netherlands, and has received recommendations for marketing clearance in Belgium, Denmark, Finland and Luxembourg. Applications are under review in France, Germany and Italy. *