As goes Antril, so goes the industry.

That is the fear among biotechnology companies and investorsas Synergen Inc. announced disappointing preliminary PhaseIII results for its lead compound to treat septic shock.

The news sent Synergen's stock (NASDAQ:SYGN) plunging about68 percent -- $28.63 -- to $13.50 Monday, down from $42.13on Friday. More than 21 million shares traded hands, thesecond-highest volume ever recorded by NASDAQ on the over-the-counter market. The company lost more than $715 millionin market valuation on 25 million shares.

In a randomized, double-blind multicenter study of 893patients, Synergen said its anti-infective Antril produced atbest 5 percent fewer deaths than in patients who receivedplacebo. Patients on placebo had a 34 percent mortality rate.The mortality rate in patients receiving a medium dose ofAntril was 31 percent, and 29 percent in patients who receiveda high dose.

Following Centocor Inc.'s safety problems with HA-1A in sepsis,Synergen had become the darling of the biotechnology sector.Antril has been the most hoped-for biotechnology drug for1993 and the primary drug in the Boulder, Colo., company'spipeline.

"It was being used as a lead indicator for the industry," saidanalyst Robert Peterson of Hanifen Imhoff Inc. in Denver. "Itcasts a pall over the whole industry."

The ticker showed the stock trading between company's bookvalue of about $14.50 per share and cash value of about $9.50per share, said John McCamant, publisher of the MedicalTechnology Stock Letter.

As of mid-January, 691,537 shares -- roughly 3 percent of thecompany's stock -- were held by short-sellers seeking torecoup on a price drop. The stock had traded as high as $66.25in recent weeks, a price that could be considered risky for acompany that has no products.

"The drug itself didn't fail, it failed on expectations," analystDavid Webber of Synergen's underwriting firm, Alex. Brown &Sons, told BioWorld.

A Phase II trial of 99 patients showed up to 64 percent fewerdeaths in patients treated with Antril. Patients who receivedplacebo had a mortality rate of 44 percent, 10 percent higherthan in the Phase III trial. This is consistent with rates of 40 to45 percent seen in four sepsis studies summarized in theJournal of the American Medical Association last December byRoger Bone, dean and vice president of medical affairs at Rush-Presbyterian St. Luke's Medical Center in Chicago.

Patients who received a medium dose of Antril in Phase II hada 25 percent mortality ratel, and those who received a highdose had a 16 percent mortality rate.

Preliminary results in the Phase II safety and dosing studywere released last October, about two months before the lastdata in the Phase III safety and efficacy study were collectedfrom some 60 centers in eight countries.

The Phase II results were so stunning, "about nine out of 10analysts -- myself included -- assumed Antril would beapproved," Peterson said.

Now investors may be wary of backing a company based onPhase II data alone, Peterson said. Alliance PharmaceuticalCorp., Centocor, Xoma Corp. and U.S. Bioscience Inc. have allexperienced setbacks following promising Phase II results fromwhich their stock prices have never fully recovered, he said.

"If you have a high-profile product and it gets crushed, thenthe prognosis for the company has not been good," addedEdmund Debler, who follows biotechnology for the internationalresearch house Mehta & Isaly.

"The thing we learned from this study which we did not knowbefore the study is that the effectiveness of the drug correlatesto the severity of the disease," said Jon Saxe, Synergen'spresident and chief executive officer.

He told reporters in a conference call shortly before the stockmarket closed on Monday that the company still plans topursue FDA approval and will discuss with regulatory agenciesin Europe, Canada and the U.S. submitting a product licenseapplication in the third quarter of 1993.

He pointed to results that indicated that one-half to two-thirdsof the most seriously ill patients showed a 20 percent to 25percent reduction in mortality when treated with Antril. Themost seriously ill patients who received placebo had amortality rate of about 44 percent.

"The issue is going to be, can you do a valid statistical analysisretrospectively on that subset," said David Stone, who preparesreports on the company for Cowen & Co. but has no bankingrelationship with Synergen. The FDA generally frowns on suchattempts, analyst Debler added.

Saxe said Synergen is still considering conducting trials inpediatric patients, patients who are severely immune-compromised, severely burned patients and patients sufferingfrom either traumatic or hemorrhagic shock.

Sepsis has stymied biotechnology companies attempting toaddress the syndrome, a complex cascade of events that arisein response to an infection. As a patient's body resolves theinfection, it can overproduce small cytokine proteins that helpcarry immune messages but can harm a patient when releasedin excess.

By blocking the cytokine IL-1 from latching onto immune cellreceptors, Antril derails the immune frenzy.

Saxe would not cite figures regarding statistical significance ofstudy results, saying that is "the type of thing we are nowanalyzing" among more than 1.5 million bits of data.

But Stone said he is "quite sure" that Synergen's overall final-stage results, indicating no more than a 5 percent improvementover mortality, are not statistically significant.

Saxe said that while Synergen does not expect to attractadditional financing in light of study results, its cash position issound. The 12-year-old company, which went public in 1986,had more than $240 million in the bank at the end of 1992,and only expected to spend up to $100 million this year ifAntril were approved for marketing, Stone said. Ken Collins,Synergen's vice president of finance and administration, saidhe expects earlier estimates of a $3-per-share loss through1993 will probably shrink as the company limits spending. Thecompany spent $92.7 million in 1992, including a one-timecharge of $18.1 million.

The market for a treatment for sepsis is estimated at $500million. Collins would not say whether the company would fundanother Phase III trial in an attempt to confirm the Phase IIresults. Time spent conducting another trial and seekingapproval could delay commercialization about two years,estimated analyst Jeffrey Casdin of Oppenheimer & Co.

The company's new manufacturing facility in Boulder willcontinue to make Antril for clinical trials, Saxe said. Heemphasized Antril's safety and stressed that the broadspectrum of patients studied in the final-stage trial helpedindicate instances in which Antril might be the most useful.

The wide variation in patients shows how difficult it is todesign an appropriate trial for sepsis, Smith Barney analystDenise Gilbert told BioWorld. C. Wole Fayemi at Hambrecht &Quist agreed, attributing the effect on stocks across the boardto the market being "anemic at best."

Cortech Inc. of Denver is perhaps closest to developing its ownanti-sepsis agent. Its stock (NASDAQ:CRTQ) closed down $1.38 ashare on Monday to $9.25, but still above its Nov. 24, 1992,initial public offering price of $8. The company's receptoragonist bradycor, which blocks the immune stimulantbradykinin, is entering a Phase II trial with strict parameters,said Cortech's chief executive officer, David Crossen. Patientsmust either have persistent low blood pressure or organmisfunction to participate.

One of the top 10 biotechnology companies in the country,Synergen will present results of its Phase III trial on March 23at the 13th International Symposium on Intensive Care andEmergency Medicine in Brussels.

"We do not feel that the intrinsic value of the company haschanged at all," Saxe concluded. Many observers pointed tofears of health care reform measures and pharmaceuticalpricing pressures that have rattled the industry. "The fact is,"Webber said, "a lot of valuations have undergone a prettysevere haircut."

-- Nancy Garcia Associate Editor

(c) 1997 American Health Consultants. All rights reserved.

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