CoCensys Tries to Dodge Bullet on Front Line of Drug Research

For better--and for worse--CoCensys Inc. is at the forefront of many of the latest trends in biotechnology.

The brainchild of two former USC researchers, the company boasts some promising technology: a group of synthetic “epalon” compounds it believes might one day treat epilepsy, insomnia, migraine and anxiety. It’s on the front lines in a series of advances in brain science that have opened a vast, uncharted marketplace for experimental drugs.

However, as with most young biotech companies, CoCensys’ results have yet to match the promise. The company still hasn’t proved that any of its compounds work, and its stock--priced at $9 at its public offering four years ago--now trades at about $6.

Unless it can arrange enough research-funding deals with big drug companies or sell more stock, CoCensys, which employs 154 people, will be out of money by September.

“We’ve got to get the stock price up,” said F. Richard Nichol, a scientist who co-founded and later sold a firm that runs clinical trials for drug companies and was hired this year to fix CoCensys.

Of course, nothing would help more than favorable results from this year’s initial patient tests of the effectiveness of epalons in treating epilepsy and migraines. Epalons are brain-calming chemicals derived from compounds that occur naturally in the human body. They were discovered by Drs. Nancy Lan and Kelvin Gee at USC, who founded CoCensys in 1989 in the hopes of turning their findings into pharmaceuticals.

But the company’s strategy for financing the long, expensive drug development process backfired, analysts say. CoCensys tried to break into the national drug distribution business, selling products developed by others, but it chose poorly, and the sales effort distracted management from its development work, analysts say.

For example, Nichol notes that the company got its first U.S. approval to test epalons in humans for epilepsy in 1993. So far the drugs have cleared only the initial tests for safety, with preliminary studies of effectiveness for epilepsy and migraine underway this year.

That makes the final, critical “phase three” trials, which involve widespread testing in adults before the drug can be cleared for sale, at least a year away.

Nichol has vowed to speed drug development, re-energize sales and lure investment.