ProCyte Corp.'s stock dropped 68 percent Monday after theKirkland, Wash.-based company said preliminary findings in itsPhase III trial of its lead product, Iamin gel, for diabetic plantarulcers showed the drug did not achieve its two primary endpoints.Karen Hedine, ProCyte's vice president of business operations, saidno statistical significance was shown in reducing wound size andthe number of patients who achieved wound closure whencompared to a placebo treatment.ProCyte's stock closed Monday at $2.81, down $6.06.Hedine said the company will continue to evaluate the blinded trial,which involved 511 diabetic patients at 30 medical centers, to findout why the findings were not as successful as those from a Phase IIstudy as well as to identify a patient population in which the drugworked.Chuck Noland, of Dakin Securities Corp. in San Francisco, saidbased on the Phase II trial results the outcome was unexpected."When I look at companies, I want to see reasonable or beyondreasonable expectations in Phase II studies," he said. "They did anumber of Phase II trials and made the right decisions aboutstructuring the Phase III study. The Phase III just didn't get there."Hedine said the Phase II trials of Iamin gel showed statisticalsignificance in four clinical endpoints for all diabetic plantar, orfoot, ulcers, including reduction in wound size and number ofpatients whose ulcers closed.In the Phase III trials, all patients received non-therapeutic woundtreatments according to guidelines, including "debridement of thewound at study entry, pressure relieving shoes and education." Theparticipants received either .5 percent drug, 2 percent drug orplacebo and were treated either for 16 or eight weeks."The continued analysis," Hedine said, "will give us insight intowhy this happened and in what population the drug worked. Butwhat was surprising to us was the placebo worked."She said the company is in good shape financially with $45 millionin cash as of the end of the third quarter, ending Sept. 30. "Weexpect to have in excess of $35 million by end of the year," sheadded. ProCyte has about 13 million shares outstanding.Iamin gel is a tripeptide copper complex. In addition to treatingdiabetic foot ulcers, the company is testing Iamin IB forinflammatory bowel disease. ProCyte also has another drug, CopperI, a protease inhibitor, to treat HIV.Noland said he believes the value of the stock is probably about$3.50 a share following failure of the Iamin gel trials."Copper has an important place in wound healing," he said. "It iseffective. This [Iamin gel for foot ulcers] was their lead project.Maybe diabetic foot ulcers are like sepsis; there are so many thingsgoing on, it's difficult to separate out the specifics."In addition to ProCyte's disappointing results, Gensia Inc., of SanDiego, also released results Monday of a failed Phase III trial forProtara. (See the Gensia article in this issue, p. 1.)Putting the two biotechnology industry "blow-ups" in perspective,Noland said, "Over the last couple of years, we've seen the tidelowered on where the boat of expectations flowed for this wholegroup. You have to drop back and take a look. Will the investmentcommunity want to pay up for anything less than great Phase IIIresults?" n

-- Charles Craig

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