In a major setback to its lead product for sepsis, Centocor Inc.announced Monday that it has suspended its second Phase IIItrial of HA-1A and stopped product sales in Europe due to anexcess of mortality observed in one arm of the study.

Stock in the Malvern, Pa., company (NASDAQ:CNTO) dropped 63percent -- $11.13 a share -- after the announcement, closingthe day at $6.63. Nearly 14 million shares changed hands, themost the company's stock has traded since last April 15, whenthe company announced that FDA would not approve HA-1Abased on the results of the first Phase III clinical trial alone.Centocor lost about $440 million in market valuation onMonday.

The news sent shock waves through the biotechnology sector,as Centocor's drop pulled the AMEX Biotechnology Stock Indexdown 12 points to 155.14 and the Chicago Board OptionExchange Biotechnology Index down 7.61 points to 149.40 in itswake.

While interim news about the HA-1A trial was expected in thefirst quarter, the mortality finding came as a surprise to mostanalysts.

The excess in mortality was found among patients treated withHA-1A who did not have gram-negative bacteremia, comparedwith patients in the same group who received placebo.BioPharm Clinical Services Inc. (BCS) of Blue Bell, Pa., anindependent clinical data management and analysis firm thatwas monitoring the second Phase III trial, informed Centocor ofthe findings and, in accordance with the protocol, the trial wassuspended.

IItLs certainly unexpected news,J David Holveck, president ofCentocor, told BioWorld. IWe just donLt know what the problemis yet. We got a phone call telling us they had raised thestatistical flag in this one arm of the study. We believe it couldbe an outgrowth of the fact that this was a broad, diversifiedstudy, involving over 500 institutions with a lot of themenrolling only one or two patients.J CentocorLs first Phase IIItrial involved only 24 institutions, according to Holveck.

Holveck said that it will be Ifour weeks-plusJ before BCScompiles and analyzes the trial data to find out what wentwrong. IThis data needs to be studied to look for possibleimbalances in underlying disease, in the timing and variationbetween the different sites to see if those factors might explainthe problem.J

If the analysis shows a problem that is not drug-related, thetrial will proceed. Holveck said the company has no plans todown-size its current staff of 1,000 employees, although he didsay that the 200-person sales force would be affected if HA-1Atrials do not resume.

The number of patients involved in the interim analysis wasnot disclosed. The primary analysis group of the study waspatients with gram-negative bacteremia in shock, and the solemeasure of efficacy was defined as survival at day 14. Holveckdid not disclose any interim results from the primary group.

The unexpected toxicity found in the non-primary group ofpatients could have serious consequences for the company,according to many analysts.

IItLs an outright disaster for the company,J said analyst JeffreySwarz of First Boston in Boston. IAt this point itLs redundant tosay 'sell the stock.' This toxicity was not seen in the first PhaseIII trial, in the compassionate use program or in the Europeanuse of the product. No one knows what happened.J

IAny chance of reviving this product is remote,J said JeffreyCasdin of Oppenheimer & Co. in New York. Casdin said thatunder the terms of CentocorLs deal with Eli Lilly and Co., if HA-1A is not approved by the end of this year, Lilly will get rightsto CentoRx, CentocorLs cardiovascular product, Iessentially forfree.J

IItLs likely that theyLll sell the company now, and itLs more thanfully valued at $6.25 a share,J said Casdin. He added that Lillywas a potential buyer.

Mitch Fink, associate professor of surgery at Harvard MedicalSchool and one of the principal investigators on the first PhaseIII study said he was IdumbstruckJ by the results.

But some analysts who asked not to be identified said thatthere were some earlier suggestions that HA-1A had potentialtoxicities. In the first Phase III trial, the subset of patients whodid not have gram-negative bacteremia and who received HA-1A also had a higher mortality rate than the group thatreceived placebo. However, the difference was not statisticallysignificant.

Comparing the two trials can be misleading because the secondtrial enrolled only patients in shock, while the first trialenrolled patients both in shock and not in shock. Detailedinformation that would allow a direct comparison has not beenmade public.

A study conducted with HA-1A in a canine model of sepsis diddemonstrate toxicities. The double-blinded, controlled study(conducted by researchers at the NIH on 28 purpose-bredbeagles and using a dose five to 10 times higher than theclinical dose of HA-1A) reported a statistically significantdifference: a 15 percent survival rate for HA-1A-treatedanimals and a 57 percent survival rate for placebo-treatedanimals.

An abstract of the study published in the journal ClinicalResearch pointed out that the results in the canine model maynot be relevant to human septic shock for a variety of reasons.

INotwithstanding, in this septic shock model, HA-1A did notproduce bacterial killing or endotoxin clearance, and in thesetting of substantial endotoxin levels and HA-1A doses,decreased survival,J the report concluded.

Holveck said that the company disagrees with the caninestudyLs premise for the mechanism of action of HA-1A. IThecanine study was designed to look at the mechanism of actionof HA-1A and concluded that it does not block endotoxin,J hesaid. IWe believe HA-1A binds to endotoxin and carries it outof the body."

Even without HA-1A, Holveck said there is still a future for thecompany. IYou have to remember that Centocor is not a one-product company, although we still carry that label, and thatLswhy you see this strong reaction,J Holveck said. IBut if you lookbeyond this product youLll see we have CentoRx, we have ourdiagnostic business, $115 million in the bank and a strongmanagement team.J

The company's cash burn rate is about $30 million a quarter.

Other companies developing drugs for the treatment of sepsismay have been affected by the fallout from Centocor's setback:Xoma Corp. (NASDAQ:XOMA) was down $1.25 a share to $8;Immunex Corp. (NASDAQ:IMNX) was down $1.75 a share to$47.38; Chiron Corp. (NASDAQ:CHIR) was down 88 cents a shareto $55.13; and Synergen Inc. (NASDAQ:SYGN) lost $1.75 a shareto close at $59.25.

-- Lisa Piercey Business Editor

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