BUSINESSWEEK ONLINE : NOVEMBER 13, 2000 ISSUE
SCIENCE & TECHNOLOGY Cell Pathways: Blockbuster or Bust Like many biotech startups, its future rides on a single drug Cell Pathways Inc. ( CLPA) CEO Robert J. Towarnicki and Chief Scientific Officer Dr. Rifat Pamukcu were understandably wary on Oct. 3. They were about to go into a meeting with investors at a UBS Warburg life sciences conference just one week after the Food & Drug Administration denied approval for the company's lead drug candidate, Aptosyn. The company, based in Horsham, Pa., had spent 11 years developing this treatment for an inherited precancerous disorder, familial adenomatous polyposis (FAP). With its only other drug years away from a possible approval, Cell Pathways was shattered by the rejection--as were its shareholders. The stock nosedived 69% on the news, from $30 to $9.31. By the day of the UBS meeting it was down to $7.25. So Towarnicki and Pamukcu did not expect an easy ride from the investors who crowded into their segment of the conference. The two men explained their plan to meet with the FDA to determine if they could overcome the agency's concerns about the safety and efficacy of the drug. They also described ongoing clinical trials testing Aptosyn against breast, lung, and prostate cancers. ''There was some animosity from upset shareholders,'' says Towarnicki. ''We got some very probing questions at the meeting, and then spent another 45 minutes talking with them in the hall.'' EXTREME RESPONSE. But what they also got were offers of additional funding from eager venture capitalists and investment bankers. ''People were handing me tear sheets at the meeting already typed up with specific financing offers--and that was after the share price dropped,'' says an amazed Pamukcu. Welcome to the crazy, mixed-up world of emerging biotech companies. Biotech stocks have been climbing for a year now, despite recent setbacks in the Nasdaq composite index, where most of them are listed. Yet hardly a week goes by that a biotech stock isn't hammered after some worrisome news about its lead--and often only--drug. Just two weeks after Cell Pathways heard from the FDA, for example, Connectics Corp. ( CNCT) saw its stock plummet 79% on the news that its proposed drug for scleroderma, a life-threatening skin disease, had failed the final phase of clinical trials. Two days later, the stock of BioCryst Pharmaceuticals Inc. ( BCRX) lost half its value when the company announced that its flu-fighting drug would be delayed until 2002. And in September, the shares of Gilead Sciences Inc. ( GILD) were hit by the news that its experimental HIV treatment hadn't lived up to expectations. ''The investment focus is on the nearest-to-market problem, and there's a real negative reaction to bad news,'' says Jim McCamant, editor of Medical Technology Stock Letter. Still, he says, ''there are a lot of drugs that looked dead at one time and five years later were making a huge profit.'' DREAM CHILDREN. The Cell Pathways saga is a textbook example of life on the biotech roller coaster. The industry could not be hotter. After more than a decade of research, the first biotech drugs that attack specific disease targets without harming healthy cells are on the market, and making buckets of money. Plus, there are some 370 more in the pipeline. But drug development is one of the riskier businesses going. Clinical trials can take years and, in the case of novel biotech treatments that work in some strange new way, be devilishly hard to design. All that work can easily come to naught. Some 80% of drugs in development never win FDA approval, and companies can burn up $500 million on research and development on their way to that rejection. Huge pharmaceutical companies can often take rejections in stride. But most biotech drugs are not developed by Big Pharma. Instead, they are the dream children of countless startups, more often than not founded by a scientist who discovered a promising compound in the lab and views it as the cure for cancer. That vision can inspire intense dedication from employees and investors. But it also creates a risky bet-the-farm business strategy. ''It costs so much and takes so long to develop a drug that these companies have little choice but to focus on just one or two,'' says PaineWebber Inc. analyst Elise T. Wang. If that one product hits a snag, however, it can endanger the company's entire future. More worrisome, it can mark the end of a promising medical treatment that failed for lack of financing. Cell Pathways' story is laden with an extra burden of emotion--the company was co-founded by Pamukcu and one of his patients, Floyd Nichols. Nichols suffered from FAP, a genetic disease that produces hundreds of precancerous polyps in the colon. The polyps can be removed, but they keep returning, often necessitating removal of the colon. Nichols had his removed at age 19, but polyps began showing up in his intestines in his mid-30s. Rather than have parts of his small intestine and stomach removed, Nichols, a computer salesman, searched for an alternative. That led him to Dr. William Waddell, a now retired surgeon at the University of Colorado Health Sciences Center. Waddell had anecdotal evidence that polyps in FAP patients could be melted away with sulindac, a 20-year-old arthritis drug from Merck that was just coming off patent. Nichols persuaded Pamukcu, his doctor at the University of Chicago, to treat him with the drug--and it worked. Doctor and patient were so elated they joined forces to found Cell Pathways in 1989 to commercialize their discovery. By now Nichols had a second crucial reason to find a cure: His son, Eric, born in 1988, also had FAP. GAIN AND LOSS. The two men hired researchers from the University of Arizona to figure out what it is in sulindac that attacked the polyps and to eliminate the drug's severe gastrointestinal side effects. They soon discovered the pertinent molecule, dubbed exisulind, and found that it was free of side effects. Sadly, Nichols did not get to follow through on his initial efforts. He died of stomach cancer in May, 1996, at the age of 43. Cell Pathways kept going. In October, 1996, it hired Towarnicki, former president of Integra LifeSciences Holdings Corp. ( IART), as chairman, CEO, and president. By now Pamukcu was convinced that exisulind did more than just melt away polyps--it prevented them from forming. Even more exciting, in test-tube and animal trials it worked against a broad range of cancer cells. Cell Pathways thought it might just have a shot at the Holy Grail of cancer research: A drug that could prevent tumors without horrible side effects. The key to exisulind, according to Cell Pathways, is a biological process called apoptosis, or programmed cell death. Most of the body's cells die off on a regular basis and are replaced by younger ones. But cancer cells short-circuit the cell-death process and proliferate uncontrollably. Apoptosis is triggered when special ''death genes'' in the blood send out an enzyme that triggers a cell's death program. Cancer cells, however, send out a countervailing enzyme, not found in normal cells, to block this trigger. Exisulind neutralizes the tumor cells' defense system, allowing the death enzymes to reach their target. When Cell Pathways started limited clinical trials of exisulind in 1996, it saw significant regression of polyps in patients, but the FDA said the company should try to show actual polyp prevention. ''Their reasoning was that this is a chronic disease so you want to show more than short-term reversals,'' says Towarnicki. Designing a trial that shows prevention--essentially trying to prove a negative--is both difficult and risky from a regulatory point of view. As a result, the company could not find a large pharmaceutical house willing to underwrite the costs of clinical trials, a typical arrangement for biotech startups. It didn't help that FAP is a relatively rare disease: There are only 15,000 patients in the U.S. Cell Pathways hopes to make its fortune on the drug's ability to fight other cancers, but the company needed the FAP approval to prove the legitimacy of its approach. Cell Pathways ran a two-year prevention trial. But when it analyzed the results in February, 1999, researchers were stunned to discover no significant polyp reduction in patients taking exisulind. The company concluded that it should have excluded patients with mild cases of FAP, and had independent researchers re-analyze the data by eliminating all patients with fewer than 10 polyps a year. Under that methodology, the drug reduced polyp formation by 50%. Cell Pathways showed the study to the FDA in June, 1999, and was asked for more data. So it ran a one-year extension with 55 patients from the prior trial, and found that patients who received exisulind for a second year had another 54% reduction in polyp formation, on top of 50% from the first year. The company sent the data off to the FDA this past June--with a heightened sense of urgency. In December, 1999, the FDA had approved G.D. Searle's arthritis drug Celebrex for FAP. In a six-month trial Celebrex had reduced polyps in FAP patients by 28%. Searle's approval meant competition for an already small market. But it also gave Cell Pathways confidence that its own drug, with seemingly better results, would win approval as well. Then, on Sept. 25--while Towarnicki and Pamukcu were in Tokyo courting a potential Japanese partner--the FDA called to say that Aptosyn, as the drug was now called, would not be approved. A follow-up letter cited ''deficiencies...regarding the safety and efficacy of the data submitted.'' Towarnicki and Pamukcu returned to Horsham and requested a meeting with the agency to see if the deficiencies can be addressed. Towarnicki believes the agency's concerns may relate to the first set of results in 1999--the ones that showed no improvement. He remains convinced that Aptosyn will eventually win approval for FAP. Industry experts are not so sure, but most give the company a fighting chance of a comeback. After all, notes Towarnicki, Taxotere, a popular cancer drug, was turned down twice before it was approved in 1998. SURVIVAL MODE. But how do you keep the business going in the meantime? Cell Pathways has only a little over a year's worth of cash left for operations at its current spending rate. Towarnicki is counting on attracting new investment on the strength of Cell Pathways' apoptosis platform. In the meantime, ''we are absolutely changing how we operate.'' For one thing, the company is paring back exploratory research. It just takes too long to get any return on such an investment. It is concentrating on clinical trials currently under way for Aptosyn in combination with other cancer drugs made by Aventis Pharmaceuticals ( AVE), Glaxo Wellcome ( GLX), Eli Lilly ( LLY), and Roche Laboratories. The combination trials for breast, lung, and prostate cancer have the added advantage of being funded by these Big Pharma partners. The company is also developing a second-generation apoptosis drug, CP461. ''I think this one is a lot more interesting, because it's a lot more potent,'' says Medical Technology's McCamant. But CP461 is just beginning early clinical trials, and is a good three years away from possible approval. Cell Pathways continues to provide Aptosyn to the 41 FAP patients who volunteered to take the drug in clinical trials. Eleven of these, Pamukcu notes, are now clinically polyp-free. It is also conducting a pediatric trial of the drug. This one may be the most important to the company, at least on an emotional basis: Founder Floyd Nichols' son Eric is one of its subjects. By Catherine Arnst in Horsham, Pa. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Cell Pathways: Blockbuster or Bust TABLE: Breaching Cancer's Defense INTERACT E-Mail to Business Week Online

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