When the government of New Zealand approved the controversial drug Isoprinosine for use by AIDS patients late last year, the drug's maker was jubilant.
After all, Newport Pharmaceuticals International Inc. had been promoting Isoprinosine as a potential AIDS treatment and saw the December action by New Zealand as a boost in its drive to market the drug in the United States, where it was developed but has never been cleared for use.
But two months later, the Food and Drug Administration notified the small, Newport Beach-based company that it had rejected its application for domestic use of the drug as therapy for AIDS-related complex, which often precedes the onset of the deadly acquired immune deficiency syndrome.
It was the third time that the agency had formally ruled against Newport Pharmaceuticals' applications for licensing Isoprinosine in the United States and once again brought cries of unfair from supporters of the company--who point to the drug's broad use in foreign nations such as New Zealand as an endorsement that the FDA refuses to heed.
But to some investors who bought into the company on the strength of its overseas acceptance and hopes that Isoprinosine would gain FDA approval, the issue has become one of whether Newport officials, including its founder and former chairman, Alvin Glasky, knowingly exaggerated their claims of the drug's effectiveness in order to profit from stock sales.
On Thursday, three unhappy shareholders filed suit against Newport in Orange County Superior Court, claiming that while Glasky and other insiders were selling stock at "artificially inflated" prices, investors were being set up for a fall.
In particular, the shareholders argue that Newport repeatedly glossed over the difficulty of winning FDA approval, while continually promoting the drug's wide use abroad.
While Isoprinosine is used in about 80 countries overseas, its acceptance in Europe, Canada and Latin America seems far from a ringing endorsement.
A recent Times survey of medical officials in more than a dozen foreign nations where Isoprinosine is used reveals that health officials in most of those countries say they have little or no evidence that the drug is effective against any of the viral diseases for which it is being prescribed.
Providing evidence of the drug's effectiveness apparently has been Newport's problem. At the root of all three formal FDA rejections of the drug has been the company's inability to document to agency standards the claims for Isoprinosine's effectiveness. Moreover, in addition to formal denials of bids for domestic licensing, the FDA has on several occasions been forced to refuse even to permit testing of Isoprinosine on a number of viral diseases.
Officials in New Zealand said they approved Isoprinosine as an AIDS treatment largely for humanitarian reasons.
The data Newport submitted to support its licensing application did not show convincing evidence that it really works, said Dr. Bob Boyd, deputy director of clinical services for the New Zealand Department of Health. Rather, he said that the data showed only that Isoprinosine is not toxic.
Still, there are isolated reports from overseas--largely from researchers for distributors of the drug--that Isoprinosine showed some promise in treatment of viral diseases such as oral and genital herpes.
Additionally, Michael Davis, head of the Canadian Department of Health and Welfare's infection and immunology section, said a review of data that Newport submitted to the Canadian government on Isoprinosine's usefulness in the treatment of a rare brain disease, subacute sclerosing panencephalitis (SSPE), led him to believe the drug does slow the progression of that usually fatal illness, a rare form of encephalitis.
In most cases, however, the foreign health officials said doctors in their countries are allowed to prescribe Isoprinosine not because there always is a lot of evidence that it works but because there are no indications that it is unsafe.
It is used to treat a laundry list of ailments including melanoma, hepatitis, herpes simplex, juvenile diabetes, the common cold, influenza, measles, mumps, chicken pox, varying forms of encephalitis, and, in New Zealand, that country's handful of AIDS patients.
Some in the medical community refer to Isoprinosine as the drug in search of a disease.
Still, overseas sales of the drug to fight this legion of diseases accounted for most of Newport's $10 million in revenues in fiscal 1986. Newport makes Isoprinosine--its only proprietary product--at plants in Costa Rica, Switzerland and Ireland.
The company's biggest markets are France and Italy, which together account for about two-thirds of all Isoprinosine sales.
In Italy the law requires scientific documentation and analysis of a medicine before it can be approved by the Ministry of Health's Department of Pharmaceutical Registration.
But a ministry official who asked to remain anonymous said that "our tests are not as severe as those of the FDA."
The official added that while no call has been made for additional tests of Isoprinosine in Italy, where it has been licensed for sale since 1979, "there have been views, aired unofficially, questioning its effectiveness."
Still, Dr. Paolo Bifignani, an endocrinologist and research physician employed by the drug firm licensed to market Isoprinosine in Italy, said there have been reports by Italian physicians of successes in the use of the drug to treat genital herpes.
France also authorized Isoprinosine's use in 1979 for treating a limited number of illnesses, including SSPE, acute viral encephalitis, measles, and viral diseases in patients with weakened immune systems.
Won French Prize
And in 1982, Isoprinosine was awarded the Prix Galien, the French pharmaceutical industry's annual prize for the drug considered to be "of most value to mankind."
But despite the industry award and the government's decision to license Isoprinosine, the French Ministry of Health says it has been difficult to determine whether Isoprinosine is any good in fighting the often-fatal viral diseases. Still, officials said, the drug was licensed anyway--because it was judged to be safe and of some possible benefit.
As it has no visible side-effects, a French health ministry official said, a growing number of doctors in that country now are using it to treat influenza, herpes, shingles and chicken pox, although it has not been formally approved for such use.
However, the spokesman said, it is nearly impossible to prove Isoprinosine's effectiveness against these illnesses because in most cases they quickly disappear on their own.
Boyd, the New Zealand health official, said: "We made it quite clear (to Newport) that we did not see any great evidence of efficacy."
But John Flood, Newport's chairman, disagrees.
"Obviously the people in New Zealand approved it because they thought it was good. I can't believe that the people in New Zealand would do something that they thought was not of benefit to the public," he said in an interview earlier this year.
Many foreign countries, however, place less emphasis on a drug's effectiveness than on its lack of harmful effects, according to Dr. John Dunne, chief of pharmaceuticals services for the World Health Organization. And health officials in many nations lack the means to verify either, he said.
Still, most of Newport's sales of Isoprinosine are in the industrialized nations of Western Europe, a fact the company takes pains to point out.
Approval From Ireland
Last year Newport won approval to market Isoprinosine in Ireland as a treatment for SSPE, but the drug is used there only in conjunction with other medications, said Dr. A. Scott, of the Republic of Ireland National Drugs Advisory Board.
Isoprinosine appears to boost the immune system enough to assist other drugs in treating the rare brain disease, but the number of patients involved so far remains "too small to draw a meaningful conclusion," Scott said.
Health officials in Britain and West Germany said Isoprinosine also has been approved for use against herpes simplex and other diseases in those countries.
However, the health department spokesmen in London refused to discuss the drug's track record for effectiveness, while German officials said they had no information about the drug.
Isoprinosine also is distributed throughout most of Latin America, where the degree to which drug manufacturers are required to prove the effectiveness of their products ranges from absolute to minimal.
Health authorities in several Central and South American countries report mixed results in Isoprinosine's use against a variety of afflictions.
In Mexico, for example, the drug has been available for treating herpes for five years. However, Ministry of Health spokesman Gerado Durantes said, "it helps a little bit with the pain, but it's no cure."
But because Isoprinosine can be purchased without prescription in Mexico, border towns like Tijuana have become magnets for American AIDS patients, desperate to buy time, who buy large quantities of the drug and smuggle it into the United States
Argentina approved Isoprinosine in 1981 "for everything" from herpes to simple colds, said Alfredo Moro, a spokesman for the Ministry of Public Health's National Institute of Drugs and Food.
Still, Moro said he "cannot affirm categorically" whether Isoprinosine works or not.
Doubts also exist in Honduras, where several doctors queried by the Ministry of Public Health on behalf of The Times said they have little faith in the drug, which has been available to them since 1972.
Despite the lukewarm reception for Isoprinosine in the foreign markets, the company insists that approvals for its use overseas are an endorsement of its effectiveness.
"Isoprinosine has been approved by a large number of countries for a wide number of uses, and that speaks for itself," Flood said. "The drug, because of the way it works, is an immune modulator, (which means that) it stimulates the immune system, enabling it to be useful in treating a variety of diseases."
And while the FDA and many foreign health officials are skeptical, the company still has boosters.
In the United States, those supporters include the Wall Street Journal's editorial writers and a number of securities analysts who specialize in the pharmaceutical industry. All have cited Isoprinosine's wide distribution abroad when complaining that the FDA rules unfairly hamstring Isoprinosine.
The Dec. 19 announcement of New Zealand's acceptance of the drug as an AIDS treatment, for example, set off a mild surge in Newport's common stock, which shot up $1.50 a share in over-the-counter trading to close at $14.125 a share.
Two months later, however, Newport Pharmaceuticals was publicly criticized by the FDA for holding a press conference at which, the agency claims, Newport officials made misleading claims about Isoprinosine's benefit to pre-AIDS patients.
Shares Went Down
From a price of more than $13 a share at the beginning of the day, Newport shares crashed 50% to $6.50 a share on Feb. 21 after the FDA disclosed its refusal to approve Newport's new drug application for Isoprinosine.
That embarrassment kicked off a palace revolt in which the company's outside directors removed Glasky, Newport 's combative founder and chairman, and decided to give the company a lower profile.
Nevertheless, Newport officials say the company will continue its quest for domestic approval of Isoprinosine.
For Newport Pharmaceuticals, the FDA's repeated rejections have hurt. In its 18 years in business, the company has had only one profitable year--$647,000 in fiscal 1985--and that profit came largely from European sales of the drug. During the fiscal year ended April 3, the company had a net loss of $820,000, which it blamed in part on an abortive domestic sales campaign that was scotched after the FDA refused to approve Isoprinosine.
So, Newport officials say, obtaining permission to market the drug domestically would give a much-needed boost to the corporation's prestige and profits.
But, even without FDA approval of the drug, at least one industry analyst agrees with the company's assertion that Newport could be profitable based on foreign sales alone. All the company would have to do is drop its costly efforts to obtain the FDA's blessing, said Jim McCamant, editor of the San Francisco-based Medical Technology Stock Letter.
Still, in the minds of company officials there is no question but that the most important thing is to earn FDA approval in the United States because it represents the biggest potential drug market.
Two weeks ago, Newport said it plans to begin new clinical trials of Isoprinosine among 2,000 patients within the next three months as a first step toward another attempt at winning FDA approval of the drug as a treatment for pre-AIDS.
NEWPORT PHARMACEUTICALS: A STOCK HISTORY
- Newport's high between 1971 and 1984 was $30 a share, while its low during the 13-year period was a mere 62.5 cents a share.
- Its 1985 high closing price was $14.50 a share on Dec. 20, the day after Newport officials announced New Zealand's approval of Isoprinosine as an AIDS treatment. The low in 1985 was $5.375 a share, reached in January and February.
- In 1986, Newport's share price went on a roller coaster ride. On Jan. 2, its closing price was $12.875 a share and it went to a 12-month high of $15.125 a share on Feb. 13, the day Newport held an ill-fated press conference that provided a scathing rebuke from the FDA.
- On Feb. 21, 1986, the day the FDA notified Newport that the drug Isoprinosine had not been approved as a treatment for AIDS-related complex, the stock fell more than 50% to close at $6.50 a share. Its high that day, reached in early trading, was $13.75 a share.
- Newport's stock bottomed out on July 28 and July 29, 1986, hitting a new 12-month low of $4.625 a share. Since then it has rebounded slightly, closing Friday at $6.50 a share.
Contributing to this story were Times staff writers Roxana Kopetman and Bob Schwartz in Orange County and foreign bureau assistants Alice Sedar in Paris and Janet Stobart in Rome.