Last week's FDA approval of Genetic Institute Inc.'s factor VIIIproduct, Recombinate Antihemophilic Factor, could inject a rayof hope into a company that has suffered some setbacks inrecent years.

"Scientifically, Genetics Institute is second only to Genentech,"Denise Gilbert, an analyst with Smith Barney in San Francisco,said in a 1990 report for Montgomery Securities. "The companyhas an 'all-star' list of products -- t-PA, EPO, GM-CSF, FactorVIII."

But the Cambridge, Mass., company (NASDAQ:GENIZ) has beenthwarted in its attempts to bring some of its most promisingproducts to market.

GI set its sights early on two of its major products:erythropoietin (EPO), a protein that regulates production of redblood cells used to treat severe anemia; and granulocyte-macrophage colony stimulating factor (GM-CSF), effective instimulating cell growth in the granulocyte and macrophagelineages.

But both drugs became the center of patent disputes:

-- December 1989. A federal magistrate in Boston splits adecision between Amgen Inc. of Thousand Oaks, Calif., and GIand its partner, Chugai Pharmaceutical Co. Ltd. of Japan, rulingthat patents held by both Amgen and GI for EPO, an anti-anemia drug, were valid.

-- May 1990. The U.S. Patent and Trademark Office (PTO)declares an interference proceeding between Immunex Corp. ofSeattle and Sandoz (GI's GM-CSF licensee) covering therecombinant technologies to make GM-CSF. To date, theinterference has not been resolved. GI filed for its patent inJuly of 1984 and Immunex in October of 1984.

-- March 1991. U.S. Court of Appeals decision invalidates GI'spatent for EPO, signifying the loss of the U.S. market for GI'sEPO. GI's stock tumbles 37 percent in the first week of March.Amgen earns $111 million on U.S. EPO sales in the first quarter.

-- March 1991. Immunex receives FDA marketing approval forGM-CSF. In February 1991 Amgen received FDA approval tomarket a competitive product, G-CSF for the correction ofneutropenia in cancer patients.

-- September 1991. News that the PTO might not issue a patenton GM-CSF sends Immunex's stock up 10 percent. However, GIremains confident it will receive a patent for GM-CSF.

-- December 1991. PTO decides in favor of Amgen's EPO inthree instances.

A vote of confidence for GI appeared early this year, however,when American Home Products Corp. (AHP) acquired a 60percent stake in the company, infusing $300 million of equity."It's an outstanding arrangement," said Pat Gage, GI's vicepresident of R&D. "We have autonomy as well as lots of money,which you need to deal with the ups and downs of thisbusiness."

While analysts agree that the approval of GI's RecombinateAntihemophilic Factor is reasonably significant for thecompany, they are not sure about the drug's earning potentialand its impact for GI.

"It's a significant plus for the company, but it took longer thanexpected to be approved, and there's a ceiling imposed on thestock because of the option held by AHP," said Jim McCamant ofthe Medical Technology Stock Letter in Berkeley, Calif.

McCamant added that the drug's success will also depend onhow quickly FDA moves on South San Francisco, Calif.-basedGenentech Inc.'s factor VIII product. "It'll be competitive," hesaid.

"It depends on how rapidly people adopt this product (GI'sfactor VIII), as it'll be much more expensive than the blood-derived alternatives," said Brandon Fradd, an analyst withMontgomery Securities in San Francisco.

Fradd assumed there will be room enough in the market forboth GI's and Genentech's products, given that there's morethan one blood-derived product on the market. "It just reducesthe size of the market," he said.

GI's Gage said he expected that the company will continue in1993 the progress it has initiated in blood cell growth factors,including the development of BMP-2, a bone-inducing proteinfor bone repair; IL-11, a platelet and white blood cell-enhancing protein as a treatment for thrombocytopenia andneutropenia for cancer patients; and M-CSF which stimulatesmacrophage activity in Phase II clinical testing in cancerpatients.

GI's stock was up 75 cents a share on Friday to $31.25.

-- Michelle Slade Associate Editor

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

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