Substitute for Blood Is Goal of Firm : Research: San Diego high-tech company is in forefront of a drive to develop a blood substitute, but it does have competition.

With all the medical magic bullets being researched by San Diego companies, the area’s growing biotechnology industry has a right to be blase about newcomers.

But the products being pursued by Alliance Pharmaceutical, which moved its headquarters here from New York state in October, are novel enough to make just about anyone take notice. The company is trying to develop an inorganic, chemical substitute for human blood.

Alliance Pharmaceutical’s blood substitute is an emulsion of fluorocarbon oil mixed with oxygen and water. The publicly traded company’s technological edge is that it has developed a patented method of mixing the oil with water and oxygen so that the stable fluid contains more than twice the amount of oxygen contained in the same volume of human blood.

Alliance Pharmaceutical’s fluorocarbon-based products have yet to survive the crucible of clinical tests and, assuming success at that level, could still be years away from federal Food and Drug Administration approval.

The company also faces a host of competitors, including one company, Green Cross of Japan, that has already been given FDA approval for a fluorocarbon-based blood substitute for limited applications. Specifically, the Green Cross product can be used as a blood substitute during angioplasty, a procedure for opening up blocked coronary arteries.

Pharmaceutical industry observers also seem divided as to what blood substitute technology is best. Several companies, including Northfield Laboratories of Northfield, Ill., are pursuing a method of recycling human and bovine hemoglobin as a way of substituting blood for patients.

Nevertheless, several industry officials are optimistic about Alliance’s chances.

“Blood substitutes are a very poorly served product area and very open-ended in the potential market size, should such a (general purpose) agent reach the market,” said Steven Gerber, a pharmaceuticals industry analyst with Oppenheimer & Co. in New York, the investment firm that underwrote Alliance Pharmaceutical’s July 1989 public stock offering.

“There is no widely used blood substitute available, and there are so many potential applications,” Gerber said.

Blood substitutes could find an enormous market in emergency medicine and in situations where patients do not want to run the risk of getting a transfusion with infected blood. Fluorocarbon-based blood substitutes are sterile and have a long shelf life.

That fluorocarbons hold promise as blood substitutes has been known for 25 years, ever since Leland Clarke, a pediatrics professor at the University of Cincinnati Medical School, conducted pioneering experiments of laboratory mice breathing while completely submerged in fluorocarbon-based solutions.

In addition to being highly effective oxygen transporters, fluorocarbons also seem to create little in the way of negative side effects. The fluorocarbon molecule is disposed of naturally by the human liver and completely released as a gas.

As a result, visionaries saw an immense potential for fluorocarbons for use in emergency medicine or in situations where blood type of the patient was unknown, since the fluorocarbon product mixes easily with all blood types.

But the riddle--which Alliance claims to have solved--was how to mix a high enough ratio of fluorocarbons with oxygen and water and thereby maximizing the oxygen delivery while still keeping the mixture stable, or avoiding the separation of the oil and water much like salad oil and vinegar separate after being shaken for salad dressing.

Founded in 1984 in Otisville, N.Y., Alliance Pharmaceutical is farther along the development path with a series of magnetic resonance contrast imaging agents than it is with the blood substitute.

One of the imaging agents called Imagent/GI successfully passed clinical tests and is now awaiting FDA approval. It could be on the market and generating revenues by the end of 1991. The company now derives all its revenue from contract research and licensing payments.

But it is clearly Alliance’s blood substitute that holds the key to the company becoming a major drug company. Few industry analysts would estimate what sort of market a general-purpose blood substitute could command, but the figure could be in the hundreds of millions of dollars.

Alliance Pharmaceutical chief executive Duane Roth said 12 million units of blood were transfused in patients in this country last year at an average cost of $200 each. Even a portion of that $2.4 billion market is an attractive goal, Roth said.

Alliance Pharmaceutical has raised $50 million in capital through marketing, licensing and venture capital deals over the last two years. The largest deal involved a marketing and licensing deal with Boehringer Ingelheim, a giant West German drug company, in 1989.

Roth, 41, became chief executive of Alliance Pharmaceutical in 1985, after spending 10 years as a Johnson & Johnson marketing executive.