Collagen Is Approaching Key Period in Its History : Pharmaceuticals: The government has asked a panel of scientists to determine if the Palo Alto company's injectable wrinkle treatment is safe.


Come Friday, Collagen Corp. will find itself under a microscope in Washington.

On that day, the Food and Drug Administration will submit data to a panel of scientific experts who will attempt to evaluate just how safe are Collagen's 10-year-old injectable products for smoothing wrinkles and acne scars.

If it sounds as if the cart might have gone before the horse, at least one powerful congressman would agree.

Rep. John H. Dingell, a Michigan Democrat looking into FDA enforcement, has voiced concern that Collagen's products went on the market without adequate testing.

"We expect Food and Drug to review (Collagen's) entire permit application (to determine whether the products) should or should not stay on the market," Dingell said.

Collagen, based in Palo Alto, has been making plump profits for years on its anti-aging injectables, made from a gooey substance found in cowhides.

But investment analysts see the company as having an even brighter future supplying treatments for leaky bladders and broken bones--if it survives the current barrage of criticism.

New wrinkles in a long-running tussle with the FDA over the company's marketing practices have put Collagen investors on a roller-coaster ride--and the company on the defensive.

Amid a rash of negative publicity, which included the FDA's seizure of $5 million worth of products, Collagen's sales have tumbled. The stock, which traded as high as $33.25 per share in March, closed Friday at $19.25, up 37 1/2 cents, in over-the-counter trading.

Meanwhile, Collagen is attempting to reverse sliding sales and broaden its product line as it defends itself.

"I think the FDA is showing they are tough and enforcement-oriented," said Howard D. Palefsky, Collagen's president and chief executive. "I don't think we've turned into criminals in the last 18 months."

But the news has been mostly crummy of late. On Aug. 16, the FDA seized $5 million worth of products at Collagen's Fremont, Calif., manufacturing plant because of an incomplete warning label.

Then in September, FDA officials told Dingell's subcommittee that Collagen had a history of mislabeling products.

Moreover, the agency has ordered Collagen to be more diligent about reporting patients' adverse reactions. And, in a dramatic shift, it has told the company to revise its labels to note a "higher-than-expected" incidence of two rare autoimmune diseases in patients who had had collagen injections. Previously, the FDA had agreed with the company that there was no such relationship.

The FDA acknowledged that it has not established that the products cause the diseases. Collagen Corp. officials maintain that the products are safe when used as directed by a qualified doctor, although they note that some patients have reported abscesses or redness after injections. The company, meanwhile, demonstrated its faith by offering to pay certain legal costs for doctors named in lawsuits that allege a link with autoimmune ailments and that go to a jury trial.

In the past, the FDA and Collagen have battled often over labeling changes and the products' uses. The agency at one point ordered Collagen to stop promoting its injections as a lip "plumper." Pouty lips had become the rage after Barbara Hershey sported the look in the 1988 film "Beaches."

Palefsky noted that injectable collagens, used primarily by well-heeled seekers of youth and beauty, have financed $130 million in research for two collagen-based products wending their way through the FDA pipeline. Contigen, for treating urinary incontinence, and Collagraft, for treating freshly broken bones, are still a year or two away from approval. The products are expected to satisfy huge markets.

"It's critical that the company move out of those (cosmetic products)," said Kurt H. Kruger, a health-care analyst with the Hambrecht & Quist brokerage firm in New York. "As the medically significant devices get added in . . ., that will give them a halo they can wear as they face Washington."

Although some supportive doctors and research analysts grouse that the FDA seems to be singling the company out, others say Collagen is finally getting the scrutiny it deserves.

Since 1981, when the product won FDA approval as a medical device, more than 760,000 people around the world have been treated. Injections cost $300 to $1,000 each.

The main products--Zyderm and Zyplast--are used by 8,000 dermatologists and plastic surgeons. Southern California accounts for 18% of the company's sales. One Beverly Hills dermatologist, Arnold William Klein, says he has injected more than 30,000 patients.

Of more than 550,000 people treated in the United States in the last decade, 14 have sued Collagen, contending that they developed a rare autoimmune condition known as polymyositis and the related dermatomyositis, or PM/DM. The disorder causes debilitating degeneration of muscle tissue and skin problems.

Collagen won two of the suits in court, nine were dismissed and two are pending. In an action the company now regrets, the first case was settled out of court in 1987.

Much of the recent attention resulted from the efforts of Linda Ramey, a Houston woman who developed PM/DM after receiving collagen injections. After losing in court, Ramey took her complaint to the Texas Department of Health.

In a reevaluation of Collagen data, the department concluded that there was a higher incidence of PM/DM in people who had had injections. Later, it persuaded FDA officials to change their minds on the matter. The scientific panel convening Friday will also review the data, although members are not expected to issue any conclusions publicly.

Some observers say the FDA's recent actions appear to be evidence of a new, more aggressive stance aimed at placating Dingell, who has lambasted the agency for what he calls lax regulation.

Indeed, since being appointed commissioner of the FDA late last year, David Kessler has been demonstrating that the once-languid agency has sharp teeth. Other targets of his actions have included Procter & Gamble's Citrus Hill orange juice, Johnson & Johnson's Retin A acne treatment and silicone breast implants.

Collagen has maintained a defiant stance, complaining that the FDA went overboard with its product seizure.

The label problem stemmed from the dropping of a line by a typist, said Dan Jolivette, the company's director of medical research. But in testimony to the Dingell panel, Ronald Johnson, the FDA's director of compliance and surveillance, said the agency had become fed up. Collagen, he said, often changes "words, phrases (and) adds information to labeling."

The company acknowledges only that it has challenged many FDA requests for labeling changes.

"Collagen's an aggressive company; there's no doubt about that," said Ann Brannan Mathieson, director of product management. "We are a kid that always argues and sometimes, I think, rightfully so."

Collagen Corp's Teeter-Totter Stock Ride Collagen Corp's stock has experienced volatility in the over-the-counter trading in 1991, primarily because of unfavorable developments surrounding the company's labeling and concerns about product safety. March 12: FDa requests more data on incontinence product. Stock drops $3.50 to $27.50 May 28: Company wins second jury verdict in case involving collagen use and autoimmune disease. Stock rises 12.5 cents to $26.25 Aug 16: FDA panel OKs Collagraft bone-fracture treatment. Later, FDA seizes $5 million in mislabeled collagen products. Stock falls $4.875. Sept. 12: FDA tells House panel that company has history of mislabeling products. Stock drops $2.75 to $14.25. Friday close: $19.25, up 37.5 cents.

Collagen Corp. The Palo Alto-based firm founded in 1975 by a biochemist and three doctors who pioneered the development of injectable collagen for smoothing wrinkles and acne scars. The company went public in 1981. For the year ended June 30 Sales: $61.3 million Research and development: $9 million Income from continuing operations: $5.1 million Net income (loss)*: ($4.3 million) Employees: 462 Common shares outstanding: 9.7 million * Loss attributable mostly to costs of spinning off Celtrix Laboratories and writing off dental implant operations. Source: Collagen Corp. annual report

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