Washington Editor

Based on poor prospects for profits and increased safety concerns of anemia drugs in general, Neose Technologies Inc. is discontinuing development of its erythropoiesis-stimulating agent (ESA), NE-180 (GlycoPEGylated erythropoietin).

The Horsham, Pa.-based firm also is cutting its work force by 35 percent as a result of its decision to end the ESA program.

"The decision to reduce our work force was difficult, but absolutely necessary," said CEO George J. Vergis.

Shares of Neose (NASDAQ:NTEC) fell 19.4 percent Wednesday, or 18 cents, to close at 75 cents.

During a conference call to investors and analysts, Vergis insisted that Neose's resolution to halt its ESA program was not based on any safety or efficacy concerns about NE-180.

"Rather, it has resulted from the findings of a formal evaluation process for partnering this compound that showed a lack of partnering interest in the near term," he said.

Continuing with the development path for NE-180, Vergis said, would not be in the best interest of Neose's shareholders, in view of the controversy surrounding ESA products.

Over the past year, ESAs have been the subject of increased scrutiny by regulatory authorities based on the results from clinical trials that suggested an increased risk of tumor growth, serious adverse cardiovascular events and death in certain clinical settings.

In the wake of numerous U.S. and European regulatory actions related to ESA products, including recent product labeling changes and reimbursement decisions, sales of Thousand Oaks, Calif.-based Amgen Inc.'s Aranesp (darbepoetin alfa) and Epogen (epoetin alfa) and Bridgewater, N.J.-based Ortho Biotech Products LP's Procrit (epoetin alfa) "have declined significantly," Vergis noted.

"Companies with development-stage ESAs, like Neose, have seen their market capitalizations decline significantly," he added.

In the background of the ESA storm, Neose took strides over the past year to move NE-180 forward, Vergis said.

The firm had intended to partner the product during its Phase II stage "due to the significant funding that would be required for Phase III development and launch," he said.

Unfortunately, Vergis lamented, the past year's events related to anemia drugs "negatively impacted the market opportunity for any ESA in development and made a timely, attractive collaboration for NE-180 unlikely."

As the firm looks forward to the next year, he said, "we do so without the cloud of controversy in the ESA category over us."

The decision to end the program will allow the company to forego $60 million to $80 million of incremental spending over the next two years, Vergis said.

The discontinuation of the NE-180 program together with the 35 percent reduction in its work force will permit Neose to extend its cash runway from the third quarter of 2008 into the third quarter of 2009, he explained.

Having an additional year of cash will allow the company to retain the resources necessary to focus on the continued development of its other products, including GlycoPEG-GCSF, the firm's long-acting version of granulocyte-colony-stimulating factor that is being investigated as a treatment of neutropenia associated with myelosuppressive chemotherapy, and recombinant blood factors VII, VIII and IX.

Those four product candidates, Vergis said, "target a combined market opportunity of $8 billion."

He noted that all four candidates are partnered "with their development fully funded."

The company has partnered with Mannheim, Germany-based BioGeneriX AG to co-develop GlycoPEG-GCSF, which completed two Phase I trials last year "with encouraging clinical data," Vergis said.

"These data demonstrated a 30 percent increase in neutrophil count and a 60 percent greater bioavailability vs. Amgen's Neulasta," he said, adding that the data "give us confidence that the product profile for GlycoPEG-GCSF will meet or exceed that of Amgen's product and that of other candidates in development."

BioGeneriX is funding and conducting the development of GlycoPEG-GCSF, Vergis said, while Neose has retained the marketing rights to the compound in the U.S., Japan, Mexico and Canada, "which comprise approximately 75 percent for worldwide sales of GCSF compounds."

BioGeneriX plans to commence a Phase II study in the first half of this year comparing several doses of GlycoPEG-GCSF with the standard, fixed marketed dose of Neulasta, he noted.

The multination, multicenter, randomized, double-blind Phase II study will enroll up to 200 patients with breast cancer receiving four cycles of chemotherapy, Vergis explained.

The clinical endpoints are the duration of severe neutropenia and the incidence of febrile neutropenia in addition to safety and tolerability.

Neose's collaborations with Bagsvaerd, Denmark-based Novo Nordisk AS to develop long-acting versions of recombinant blood factors VII, VIII and IX are "proceeding well," Vergis said.

Neose's GlycoPEGylated Factor VIIa, a long-acting version of Novo Nordisk's NovoSeven coagulation recombinant factor VIIa, currently is being studied in a Phase I trial to assess the safety and pharmacokinetics of the hemostasis compound, he noted.

The firms are working toward advancing their recombinant blood factors VIII and IX toward clinical development, Vergis added.

While Neose has retained the resources necessary to advance its current pipeline, he said, the company has been working on a strategy to fuel the pipeline long term.

"We have ensured that the resources that we have retained can be easily transitioned to research and development of new technologies and Neose drug candidates," Vergis maintained.

"As we optimally conduct our GlycoPEG-GCSF and blood factor support programs, we have the opportunity in late 2008 and through 2009 to engage our research engine to focus on the development of products that will have a clear opportunity for clinical differentiation in their respective categories," he added.