Newport Pharmaceuticals Will Give Bid for Isoprinosine OK Its Last, Best Shot

Newport Pharmaceuticals International is yet another example of an Orange County company with a potentially hot product that has had trouble getting government approval. As a result, the company’s stock price has undergone wild gyrations.

A few analysts, however, are betting that a new, nearly completed study will provide enough ammunition to allow Newport Pharmaceuticals to submit its isoprinosine drug for Federal Drug Administration review as an AIDS treatment by the end of the year.

The company’s best, and maybe last, shot at getting the drug approved is riding on the findings of the yearlong, 2,000-patient study conducted in the United States, Australia and Denmark. The results will determine whether the company will push ahead for FDA approval or give up on marketing the drug in the United States and suspend the $4 million to $5 million it spends each year on isoprinosine research.

If the FDA approves the drug, isoprinosine could be in pharmacies by early next year, the analysts said. But that’s a best-case scenario.

In fact, should the test results fail to support earlier studies, Newport Pharmaceuticals will probably end its 14-year effort to sell the drug in the United States. The company has tried unsuccessfully in the past to market the drug as a treatment for herpes and encephalitis.

“If the test results show that the drug is not effective, we would give serious consideration to curtailing our research expenditures and would probably move on to other areas,” said a company official, Judith Woodward Archbold.

The FDA waiting game is nothing new for Newport Pharmaceuticals. Back in 1985, enthusiasm for isoprinosine as a possible AIDS treatment sent the company’s stock price soaring from $6 a share to $14 within a few months.

But in early 1986, when the FDA denied approval of isoprinosine on the basis that the company’s supporting research was flawed, the stock quickly plunged to about $5 a share.

For years, Newport Pharmaceuticals has manufactured isoprinosine for sale in several European countries, particularly in France and Italy, as a treatment for a wide array of viral infections. The company has manufacturing plants in Ireland and and Costa Rica, although the drug is marketed by foreign companies under license.

And Newport Pharmaceuticals recently obtained a license to market the drug in Japan. But the company has never made money on the drug because of the costs associated with trying to win FDA approval.

Isoprinosine has been found in some studies to bolster the body’s natural immune system. The studies suggest that the drug may slow the advance of AIDS in its early stages.

The company, which dumped its old management team in 1986 after isoprinosine was first turned down, is unlikely to submit its test results to the FDA unless it is confident that it has a very strong case for approval, said Steven Gerber, a securities analyst with L.H. Friend & Co., a Los Angeles brokerage.

Chief executive J. Roberts Fosberg and Dr. Stephen Robins, in charge of isoprinosine testing, have been heading the company since 1987, one reason some analysts give Newport Pharmaceuticals a strong chance for success.

“Part of the company’s past problem is that they had no experience dealing with the FDA. These two men have presided over a number of successful drug approvals and marketing in the U.S.,” Gerber said.

Newport Pharmaceuticals stock, which started out the year at $2.50, closed on Friday at $5.25. Once the company files for FDA approval, the stock should move up to about $7 a share, Gerber said. FDA approval could push the stock up to the $15 to $20 range, he said.

However, if the test results are disappointing and the company decides to scrap the FDA application, Gerber expects the stock to dip to $3 a share.

In the latest issue of Medical Technology Stock Letter, editor Jim McCamant agreed that the stock is a good value at under $6.

Gerber said that even if the company fails on its isoprinosine push, the company will be profitable in 1989 and would remain an attractive, long-term investment. Newport Pharmaceuticals has been in the red since 1985.

Last year, the company purchased a pharmaceutical mail-order business, America’s Pharmacy, which has been a moneymaker so far.

Additionally, once the company is freed from the costly research and development on isoprinosine, whether the drug is approved or not, the company will start posting positive numbers, Gerber predicts.

If the drug is not approved, the company should make a profit of $2.3 million on $47 million in revenues for 1989, Gerber said. If isoprinosine is approved, he expects the company will make $23 million on $90 million in sales.

For 1988, the company should lose about $2 million on $36 million in sales. Last year, Newport Pharmaceuticals lost $4.4 million on $23 million in sales.