Still Hoping for a Cure

SAN DIEGO

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Amylin Pharmaceuticals is developing promising drugs intended to improve the health and extend the lives of millions of diabetics.

But these are lean, hard times for the biotechnology company. In the last year, Amylin was forced to cut its work force by 85% and vacate three-quarters of its office and lab space. A share of the company’s stock, once worth more than $20, today struggles to stay above $1.

A visitor to its headquarters in a San Diego industrial park can expect trouble finding the company’s second-floor offices. The front door is kept locked; the company no longer employs a receptionist.

Most stock analysts who track the company have given up on it.

Yet Amylin’s management remains hopeful, knowing that its fortunes could change dramatically later this year when it compiles the results of two major studies of its lead product, a drug that promises to help control blood sugar in insulin-using diabetics.

After a dozen years, Amylin, having reached its depths, may yet rise again. Or it may sink even further if the results of the trials prove disappointing.

How Amylin Pharmaceuticals got to this make-or-break point is a story in miniature of the biotech industry, where the future of many companies is often wedded to the prospects of one or two still-unproven drugs.

Like Amylin, few of the 1,300 or so biotech firms in the U.S. have products on the market or show a profit.

Even companies within striking distance of gaining marketing approval for drugs have no assurance of success. A number of new drugs fail to pass muster and must be abandoned, usually after a long period of development--sometimes because they are no more effective than a placebo or because of unanticipated side effects.

The Breakdown and Storage of Sugar

Amylin’s story in a sense begins almost 80 years ago with the discovery of insulin, the natural hormone produced by the pancreas and missing in patients with classic diabetes. Insulin orchestrates the breakdown and storage of the sugar absorbed from food into the bloodstream. Without enough insulin, blood sugar levels rise, leading to coma and death.

Insulin extracted from animal tissue changed the grim outlook for patients with type 1 diabetes, the kind first seen in children and adolescents, and for those in advanced stages of type 2 diabetes, which tends to develop later in life.

Regular insulin injections help control blood sugar but do not cure the disease. And high levels of blood sugar inevitably take their toll on the body. In later years, many diabetics suffer blindness, kidney failure, nerve damage or heart disease.

Today, diabetes is an enormous and growing health problem, affecting as many as 16 million Americans at an annual cost of $105 billion, according to a recent report to Congress by a team of diabetes experts.

It was only in the mid-1980s that scientists discovered a naturally occurring chemical secreted by the pancreas along with insulin. Researcher Garth Cooper and his colleagues at Oxford University called the substance amylin, and Cooper went on to become a co-founder of the company named after the discovery. (Researchers at the University of Minnesota say they discovered the same hormone months earlier, giving it a different name. The company settled a patent infringement dispute with the university last fall.)

The hormone’s role in controlling blood sugar is complicated and only partly understood. And unlike insulin, amylin is extremely difficult to work with--the molecules are sticky, forming globules that make it useless as a drug.

So Amylin scientists made small changes to the molecule, flattening its surface and reducing its stickiness. The result is pramlintide, a synthetic version that can be easily injected along with insulin.

The costs of developing such a drug are high, but so is the potential for sales. In the U.S. and Europe alone, there are more than 5 million diabetics who take multiple doses of insulin every day, and all would benefit from improved control of blood sugar.

In its first five years, the company raised $19 million from private investments and venture capital. It turned to the public market in January 1992, raising $64 million by issuing 4.6 million shares at $14 apiece.

Like a lot of young companies with no products for sale, it was living hand to mouth--returning again and again to private and public markets for funding. It raised $25 million in 1993, $7 million in 1994.

As the new medication passed all its preliminary safety tests, expectations were running high.

In 1995, the company announced that it had signed an agreement with pharmaceutical giant Johnson & Johnson, which promised to split the costs of testing pramlintide and taking it to market. Over the next two years, the company raised $45 million more to cover its share of rising expenses.

But then the disappointments began.

Problems With Patient Trials

To win approval to sell pramlintide, the partners had to show that the drug worked in randomized studies, in which neither patient nor doctor knew whether the patient was receiving pramlintide with insulin or just insulin alone. These were the crucial trials, each involving hundreds of diabetic patients for as long as a year at a time.

The first hint of a problem came in 1997, when the company released the first of its findings.

The results in the type 1 diabetics were “statistically significant and clinically meaningful,” trumpeted a company news release. The modest effect was a “proof of concept,” the company said at the time--good evidence that the drug worked, even though there was work to be done to find the best way to use it.

But the findings in type 2 patients, those who contracted the disease later in life, were described as merely “encouraging.” After a full year on the treatment, the difference between patients taking pramlintide and those taking insulin alone were not statistically significant.

The company announced the results on a Friday. The following Monday, the share price dropped more than 40%.

Several months later, in March of 1998, Johnson & Johnson announced that it was pulling out of its partnership with Amylin--after sinking more than $160 million into research and development.

“It was totally unexpected,” says Amylin Chairman and Chief Executive Joseph C. Cook Jr., who at the time was a member of Amylin’s board of directors. He recalled getting the news by phone while having dinner with a friend in Miami. “He looked at me and said, ‘Are you ill?’ ”

The first round of layoffs followed, and Cook was elevated to his current post as top Amylin executive.

The company remained hopeful. Other major trials were in the works, and doses were adjusted based on the previous results.

In July, the company raised $13 million in a private stock offering. Among the investors were company insiders as well as former CEO Richard M. Haugen.

But in October, the company learned the results of two major studies conducted in Europe and Canada. Cook had traveled to Virginia to a consultant’s office to get the findings being spit out of a consulting firm’s computer. The results were devastating.

At the highest doses in both type 1 and type 2 diabetics, there was no statistically significant benefit to the patients receiving pramlintide.

Over the next several days, company officials met privately to draw up plans to lay off 75% of Amylin’s remaining work force and to move out of most of the company’s leased office and laboratory space.

“It is an emotional time to stand in front of the team and say three-quarters of you are not going to be here,” Cook recalled.

Two additional trials of the drug were about to begin in the U.S.--one in type 1 diabetics, the other in type 2. Cook said he and his advisors considered abandoning those trials.

“Is it appropriate to keep spending money, pursuing what you hope to be the outcome and putting people into clinical trials when the outcome may not necessarily yield results?” Cook said.

Before making that decision, the company consulted diabetes experts from around the world, including some known to be skeptical of the value of pramlintide.

A careful analysis of the results revealed that about half the patients who received pramlintide were doing very well compared with those who did not receive it. Moreover, the ones who did well--the responders--generally showed a meaningful drop in blood sugar levels after just four weeks and actually lost weight, a desirable result in managing the disease.

Amylin executives argue that it may be possible to identify these responders and make a decision about who will benefit from the drug early in treatment.

But that kind of retrospective analysis is usually not acceptable to FDA reviewers, who worry that the effect could simply be the result of data manipulation.

2 U.S. Trials Are Critical

Still, Cook and his fellow Amylin executives remain optimistic.

The two U.S. trials now underway “are an absolutely critical component of defining what this company looks like going forward,” Cook said. “If those studies are not positive, we will have another scenario to deal with.”

The company is forging ahead, not just with pramlintide, but with another diabetes drug--a synthetic version of a compound extracted from the saliva of the Gila monster. The product is already in clinical trials but years away from approval, even if results continue to be positive.

The company, which had been spending at a $100-million-a-year clip as it scaled up to bring pramlintide to market, has pulled back to less than $20 million.

In March, Amylin raised $15 million from the sale of preferred stock to a select group of private investors, including several board members. The money, along with cash on hand, will see the company into next year--buying enough time to complete the U.S. pramlintide studies and at least begin the FDA review process.

Just last month, the company announced that it had renamed the drug Symlin for marketing purposes and contracted with a British pharmaceutical firm to produce cartridges of the drug after it wins regulatory approval.

Among those analysts who have given up on Amylin is Alan Auerbach of First Security Van Kasper & Co. in San Francisco.

“You’ve seen the movie ‘Titanic,’ ” he said. “You can only stay on the boat so long before you figure out it’s going under and you’ve got to get off.”

However, Jim McCamant, editor of the Medical Technology Stock Letter, rates Amylin shares a buy under $2. “All of the data they’ve produced consistently show they’ve got efficacy in type 1 diabetes,” he said. “It’s highly likely when the [current] trials are finished that they will file for and get approval.”

Diabetes experts like Dr. Gerald Bernstein, president of the American Diabetes Assn. and director of diabetes programs at New York’s Beth Israel Health Care Systems, are waiting for the results of the final U.S. trials.

“Some of the early data is very good,” said Bernstein, who briefly consulted for the company. “It works from what I’ve seen. But does it work enough? I don’t know.”

Times staff writer Paul Jacobs can be reached at paul.jacobs@latimes.com.

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Amylin Shares Slide as News Disappoints

Over the last two years, Amylin Pharmaceuticals of San Diego has been completing large-scale trials of its diabetes drug pramlintide (now called Symlin). The stock market considers the results to date to be unsuccessful. Here are a few of the key events: