Agouron’s ‘Magic Bullet’ : HIV Drug Stirs Interest of Doctors, Investors

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Once again, a San Diego biotechnology company seems poised to receive approval from the Food and Drug Administration to sell a new “magic bullet” drug, the company’s stock is heading through the roof, and hopes are high that the city will soon see the flowering of its first major home-grown drug company.

This time around, the company is Agouron Pharmaceuticals. Its Viracept is one of a new class of HIV drugs called protease inhibitors that have achieved encouraging results in the battle against the virus that causes AIDS. If approved, Wall Street is predicting a $600-million annual market for Viracept.

Last week, Agouron presented data from its final phase of clinical trials at a medical conference in Washington, and the results caused a flurry of optimism in the medical community, not to mention renewed interest on Wall Street.


Big bucks are riding on Agouron: The company has raised close to $500 million from investors, even though it has yet to generate any drug revenue.

Although down from last week’s peak, Agouron’s Tuesday stock close of $79.625 in over-the-counter trading is more than double its price a year ago and up from a low of $15 a share three years ago.

The optimism is founded not just on the positive clinical results, but also because the FDA is now processing--and in some cases approving--clinical drugs with newfound dispatch, especially those that purport to treat AIDS and cancer, said PaineWebber biotechnology analyst Douglas Lind.

If it receives FDA approval, Agouron’s Viracept would be the fourth protease inhibitor to get the agency’s green flag in the last 14 months--which for the FDA equates to a veritable flurry of approvals.

Agouron, founded in 1984 by Chief Executive Peter Johnson and other UC San Diego scientists, has a stock market value of more than $1 billion. Employees total 540, more than any other San Diego biotechnology company, and double its work force from a year ago.

But the community could be forgiven a little skepticism. Observers of this city’s biotechnology industry remember how another local company’s high hopes were dashed when FDA approval, thought to be all but a formality, didn’t come through as planned.


The company was Gensia Pharmaceuticals, founded by alumni of San Diego-based Hybritech, which was sold to Eli Lilly in 1985 for $485 million, then San Diego’s biggest biotechnology success. By the early 1990s, Gensia seemed on track to receive FDA approval for Protara, a drug to limit heart tissue damage in bypass surgery patients.

Partly because of its pedigree, Gensia was also able to raise hundreds of millions of dollars and saw its stock price rise as high as $42 in 1992, as it passed through clinical trials with flying colors.

But in October 1994 came the crushing news: The FDA ruled that Protara provided no more meaningful advantages to surgical patients than a placebo. Gensia stock now trades in the $4 range.

Housing’s Back

San Diego County’s new housing market picked up in 1996, posting the highest number of units sold since 1990, said Russ Valone, president of Market Profiles, a San Diego-based real estate market research firm. Developers sold 4,708 new detached single-family houses, an 19% gain over last year’s 3,970 units.

Perhaps most indicative of a recovery, Valone said the county saw sales of 900 “luxury” units, those priced at more than $300,000.

That’s up 50% from 1995 and a good sign of “reinforced consumer confidence in the housing market.”


The average price of new detached units sold in 1996 in the county was $242,700, up 4.3% from the previous year’s $233,300.