By Debbie Strickland

Preliminary results from a Phase III clinical trial suggest Genelabs Technologies Inc.'s dehydroepiandrosterone (DHEA)-based lupus drug, GL701, could allow doctors to safely lower doses of prednisone, a side effect-riddled synthetic steroid treatment for the disease.

"We are encouraged by these preliminary results," said Irene Chow, president and CEO of the Redwood City, Calif.-based company.

Prednisone, a life-saving lupus treatment, has been implicated in complications such as premature atherosclerosis, osteoporosis and severe, sometimes fatal, infections.

In a "meaningful" percentage of patients with mild to moderate lupus activity, 200 mg daily doses of GL701 allowed physicians to cut daily prednisone dosage by an undisclosed amount for at least two consecutive months.

However, when all trial subjects - including those with low disease activity - were included in the analysis, results failed to achieve statistical significance for the key endpoint: reduction of prednisone dosage while maintaining stable or reduced disease activity.

"Unfortunately, it's a mixed picture," said analyst Franklin Berger, of New York-based Josephthal Lyon & Ross. "The study missed its primary endpoint, but it gave corroborative results that dovetailed with the previous Phase IIs, which also indicated there would be a steroid-sparing feature."

More patients and "more finely tuned patient criteria" - both features of a second Phase III trial now underway and slated for completion later this year - might have made for stronger results, Berger said.

Following Genelabs' announcement, the company's stock (NASDAQ:GNLB) fell Friday to $2.75 per share, down 27 percent from the previous day's $3.75.

Company officials were cautiously upbeat about the results.

Cautiosly Upbeat On Results

"What we learned from this study was very important and valuable because it was the first multicenter, placebo-control trial for a new compound for systemic lupus erythematosus (SLE) in more than 30 years," said Debra Catz Bannister, vice president for corporate communications and investor relations. "The study suggests daily administration of 200 mg of GL701 could reduce steroid usage in women with clinically active lupus. That's a very important preliminary finding."

Genelabs' 18-site, double-blind U.S. trial followed 191 women with mild to moderate cases of SLE who were receiving daily doses of 10 to 30 mg of prednisone. Over the course of seven to nine months, patients received one of three daily treatments * a placebo, a 100 mg dose of GL701 or a 200 mg dose of the drug.

At enrollment, each participant's degree of illness was rated using the Systemic Lupus Erythematosus Disease Activity Index (SLEDAI). Scores ranged from 0 to 22, with 0 indicating an absence of recent disease activity. The median score was 4, with 72 percent of patients scoring above 2. During the study, prednisone doses were reduced whenever a patient's SLEDAI score had not increased compared to the previous visit.

A "meaningful" percentage of those patients on 200 mg of GL701 with initial SLEDAI scores above 2 were able to lower their prednisone levels to 7.5 mg per day - an amount mirroring normal physiological steroid levels.

Those with SLEDAI scores of 2 and under showed an unexpectedly high response rate to placebo, which, though not a boost for GL701, suggests that standard prednisone dosages may be higher than necessary.

"We never knew that before we did this study," said Bannister, "It has been believed that low-disease-activity patients, need prednisone to keep the disease inactive. Now we believe that may not be necessary."

The trial also broke ground as the first to use the SLEDAI scale to actively direct treatment, said Ken Schwartz, Genelabs' senior medical director.

The second Phase III trial of the drug, involving 300 patients began in March 1996 at 24 U.S. sites and is designed to determine whether GL701 can improve clinical outcome or disease symptoms in female SLE patients.

Genelabs has a U.S. patent for the use of DHEA in lupus patients to reduce concomitant steroid dosage. DHEA is a naturally occurring hormone that is produced by the adrenal glands. Lupus patients usually have abnormally low levels.

Some over-the-counter dietary supplements contain compounds in the DHEA family, a cause of concern to the company, which contends the FDA should regulate as a drug. Genelabs' 1996 annual report notes that the company may not be able to obtain an all-encompassing patent on the compound.

The FDA has conferred a Subpart E designation on GL701, allowing the company to accelerate development.

Although Genelabs has other projects in the works, Wall Street sees this compound as the company's "No. 1 project, in terms of producing a revenue and profit stream in the near term," Berger said.

Genelabs Technologies' other efforts include research into genomics, hepatitis and other infectious diseases, and gene-regulating drugs. The lead research program is based on a proprietary enabling technology, Merlin, for creating gene-specific, small organic, DNA-binding molecules. The company's Singapore-based subsidiary, Genelabs Diag-nostics, markets tests in Europe and Asia.

The company reported a loss of $11.4 million on revenues of $13.3 million for the fiscal year ending Dec. 31, 1996. *