Maker of hepatitis drug fights takeover by ally

April 30, 1994|By Patricia Meisol | Patricia Meisol,Sun Staff Writer

It's been a bizarre two days at Alpha 1 Biochemicals Inc.

The Bethesda-based company announced Thursday that its new hepatitis drug might not be as effective as first hoped. Stunned, the California company that plans to distribute the drug later this year insisted the news must be a mistake, and moved in to buy 15 percent of Alpha 1.

Yesterday, Alpha fought back with a plan to protect itself from a takeover.

At stake is an eagerly awaited second-generation drug for chronic hepatitis B. The drug, tymosin alpha 1, is widely held to be cheaper, safer and more effective than the drug now on the market. It is already approved for use in Singapore and clinical trials are under way in other countries.

But earlier this week Alpha 1 announced that partial data from U.S. clinical trials involving 99 people showed the drug to be no more effective than drinking water. The announcement caused its stock and that of the distributor, SciClone Pharmaceuticals Inc., to plunge by more than two-thirds.

SciClone, based in San Mateo, Calif., has exclusive rights to sell thymosin in the U.S. and has acquired rights to sell it worldwide.

Saying the preliminary results didn't match data from other clinical trials, SciClone announced it had acquired more than 15 percent of the outstanding common stock of Alpha and would purchase up to 20 percent in the next several months.

SciClone's chairman and chief executive officer, Thomas E. Moore, said SciClone was acting to gain control over the manufacturing process and access to information about the trials from the Maryland company.

The move would ensure SciClone could deliver tymosin on plan overseas by the end of the year.

SciClone has approval to market the drug in Singapore, where an estimated 100,000 people have the liver disease, but it has been stymied because Alpha hasn't been able to produce it commercially. The drug is also in clinical trials in Taiwan, Mexico and Latin America. Before this week's news, some analysts had estimated a $1 billion-plus market for the drug.

To underscore its commitment, SciClone said yesterday that its directors approved a stock repurchase plan for up to 1 million shares of its own common stock. SciClone said it believed the shares are significantly undervalued and would be a strong investment at today's prices.

Alpha 1 is the sole-source supplier of the drug, which is being marketed under the name Zadaxin. The drug's effectiveness for hepatitis B won't be known fully for months, but Alpha 1 said it didn't expect the results to warrant filing a new drug application with the U.S. Food and Drug Administration.

Some analysts took the news as the death knell for the drug. But others expressed surprise that Alpha released the data before it was audited, and suggested something could be amiss.

"This is a very unusual trend of events, where you would have these kind of results for a single test or clinical trial that differ so significantly from other trials that have been conducted in a number of other countries with comparable patients," said Bradley S. Wilson, senior analyst and vice president of GS2 Securities in Milwaukee.

It is difficult to judge the results, he said, because only Alpha knows how and where the study was conducted, factors that affect the outcome.

He is standing behind his "buy" rating for SciClone. "You have well over 1,000 people who have undergone treatment with the drug and had favorable responses well above [Schering-Plough Corp.'s] alpha interferon," the only drug now on the market for hepatitis.

Even if there is only 1 percent difference in remission between the drugs, he said, tymosin would become the drug of choice because of its cheaper price and, so far, lack of side effects.

The drug also is in clinical trials for the treatment of patients with chronic hepatitis C and AIDS.

To steel the company against a takeover, Alpha directors yesterday adopted a shareholders' rights plan. In the event anyone purchases 25 percent of common stock, existing shareholders would have the right to purchase a new series of preferred stock for $16 a share.

In Nasdaq trading yesterday, prices of both stocks remained unchanged from Thursday, when Alpha 1 lost 68 percent to close at $2 and SciClone shares closed down 60 percent, at $5.188.

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