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Gensia Stock Falls by Half on Failure of Flagship Drug : Biotechnology: Hoped-for heart medication breakthrough fizzles, but the company is expected to survive.

October 18, 1994|DAVID R. OLMOS | TIMES STAFF WRITER

Gensia Inc., a San Diego company that had been considered one of the most promising biotechnology firms in the country, suffered a stunning setback Monday when its flagship heart drug failed to pass muster in human clinical trials.

Gensia's stock plummeted 51%--falling $5.31 to $5.06--on the news that the drug, Protara, failed to prove significantly more effective than a placebo in reducing heart attacks and other cardiovascular complications in patients undergoing coronary bypass surgery.

Protara had been considered a breakthrough drug, with analysts forecasting worldwide sales of up to several hundred million dollars over the next several years if the drug could gain U.S. market approval. But an outside panel monitoring clinical tests on 2,700 patients concluded that the drug did not produce a statistically significant reduction in heart attacks.

The results "certainly took away this potential blockbuster drug," said David F. Hale, Gensia's chairman and chief executive. Hale said he still thinks Protara can be an important drug, but the company will suspend clinical trials pending a closer look at the results.

"We believe we have shown the drug has a therapeutic action," Hale said. "We just haven't been able to demonstrate the statistical significance in this study."

Gensia wasn't the only biotechnology company to take a beating Monday on disappointing test results. Shares of Kirkland, Wash.-based Procyte plunged 68%--dropping $6.06 to $2.81--after the firm announced that an ulcer drug flopped in clinical tests.

The test results are among a series of disappointments in biotechnology this year when drugs have failed to live up to expectations. Analysts said the Gensia and Procyte cases illustrate once again the unpredictability of new drug development and the risk of investing in young biotech firms.

However, although the Protara results are a big setback, analysts said Gensia should survive because it has other successful products on the market and some promising drugs in development.

"The company will survive, but it's certainly a setback," said Jim McCamant, editor of the Medical Technology Stock Letter in Berkeley. "This was the biggest potential product in their pipeline."

Richard Schneider, a general partner at Domain Associates, a Costa Mesa biotech investment firm that was an early backer of Gensia, said he was surprised by the results but still likes Gensia's chances for success.

Gensia "is a very well-balanced and well-managed company," he said. "There is no question this is a body blow, but it's not a one-product company."

Hale said the company plans to analyze the test data further before deciding on the future of Protara for use in coronary bypass surgery or non-cardiac surgery. Based on the trial results, the company said it will cancel a separate clinical trial to examine Protara's effectiveness in preventing medical complications in patients undergoing major non-cardiac surgery.

Hale said one option for Gensia would be to find a corporate partner to finance additional clinical trials of Protara in exchange for a share of any future revenue. Such trials typically cost in excess of $20 million.

Because of the Protara results, Gensia said it will "re-examine its spending levels and the allocation of resources." That will probably include some staff cuts at the 525-employee company, but Hale said "we don't see a major downsizing at Gensia."

Hale said the company had $45 million in cash as of Sept. 30 and expects a $20-million investment from Boehringer Mannheim Pharmaceuticals Corp. for a recent deal to jointly develop and market a cardiovascular drug-delivery system.

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