New doubts raised by trial methods in cancer drug study.

Results from a drug trial that was supposed to clarify the prospects of a much-hyped breast cancer drug candidate have only added fuel to a raging debate over the company that is developing it.

On Dec. 5, American Pharmaceutical Partners Inc. released final data from a phase 3 trial that it claimed show its Abraxane to be significantly more effective in fighting breast cancer than Taxol, the blockbuster drug that is now a standard treatment.

The stock initially surged on the news, but since then it has dropped back down as short sellers, who have been gunning for the company and its controversial chief executive, L.A.-based Dr. Patrick Soon-Shiong, seized on questions about the study's methodology and the drug's potential to gain Food and Drug Administration approval.

Among skeptics' quibbles: The study was conducted with more than three-quarters of the patients in Russia, a situation some consider unusual. American Pharmaceutical Partners dropped an earlier partner that was originally conducting the study, and became embroiled in a lawsuit with it that is now settled. In addition, the Taxol results produced in the Russian trial showed less effectiveness than other studies--perhaps making Abraxane look better by comparison.

While the questions raised by the short sellers have taken the shine off of the study, they haven't been enough to sink the stock entirely. At a close of $33.60 on Dec. 31, American Pharmaceutical Partners shares were slightly below its close of $35.50 on Dec. 5, before the results were released.

Company officials say they hope to get the drug approved without any further trials. In light of the results, however, and the emergence of other potential competitors to Taxol, the more applicable question might be whether Abraxane will ever reach revenue projections that run as high as $500 million.

"Abraxane is a little bit more effective and a little bit easier to tolerate (than Taxol) but it is certainly not a home run," said Dr. Harold Burstein, a breast cancer specialist at Harvard's Dana-Farber Cancer Institute. Burstein said he is not aligned with either the stock's boosters or its detractors.

Optimistic spin?

The trial of 454 patients showed that 33 percent of the women given Abraxane saw their tumors substantially shrink while only 19 percent of those given Taxol saw similar results. Abraxane also kept patients' tumors under control for almost 22 weeks, nearly six weeks longer than did Taxol.

At the same time, the company reported fewer side effects with Abraxane, including less of a reduction in infection-fighting white blood cells. And while it caused more temporary nerve damage than Taxol, patients also recovered faster from that damage.

The company ascribes these results to the drug's novel delivery platform. The active ingredient in both drugs is a chemical called paclitaxel, which is insoluble in water. Taxol is dissolved in a castor oil derivative called Cremaphor that has its own side effects. The paclitaxel in Abraxane is encapsulated in albumin, a natural human blood protein, allowing it to be given in higher doses, according to the company.

"It would be a drug widely taken up by oncologists who use Taxol," said Dr. William Gradishar, the study's principal investigator and co-director of the Lynn Sage Breast Cancer Program at Northwestern University.

The company is also studying whether it can use the delivery technology underlying Abraxane for other drugs.

Some analysts now expect the company to be able to complete a drug application and gain FDA approval without additional studies by the second half of 2004.

Elliot Wilbur, one of the biggest boosters and an analyst with CIBC World Markets, an underwriter of the 2001 initial public offering, projects $500 million in annual sales by 2007 and has a $49 price target on the stock.

But Dr. Gregory Frykman, a former FDA medical reviewer and now an analyst with Charles Schwab Capital Markets, has been critical of the trial's design and remains skeptical--although he acknowledged that the results were better than he anticipated.

"We still believe the odds favor non-approval with the phase 1, 2 and 3 data in hand for Abraxane at this time," he wrote in a Dec. 8 research note.

Besides questioning the patients' location, Frykman maintains there were too few participants. He also said the poor performance of patients receiving Taxol might indicate some flaw and questions the rigor of the protocol and how closely it was followed.

Gradishar, the study's principal investigator, said the trial was conducted according to a protocol worked out with the FDA and noted that the agency has approved other drugs principally studied in Russia. The Taxol results, while on the low end, were within an accepted range at 19 percent efficacy, he said. "There is nothing in my view that is suspect about the data," he said.

(Generally, Taxol has about a 25 percent efficacy rate, meaning that a quarter of the tumors treated shrink by more than 50 percent, Burstein said.)

Long line of skeptics

American Pharmaceutical Partners has drawn skepticism on Wall Street from the time of its 2001 public offering, partially due to its unorthodox structure. About two thirds of its stock is held by American BioScience Inc., a private Santa Monica firm controlled by Soon-Shiong. (American Pharmaceutical Partners is now based in Schaumberg, Ill.)

Moreover, $45 million from the proceeds of the $144 million IPO were passed on to American BioScience in the form of a license for the Abraxane drug, and as much as $60 million in additional milestone and other payments may be due the parent, according to SEC documents. Another $15 million in license fees was paid before the IPO.

Soon-Shiong and his companies also have been involved in a variety of litigation, including a lawsuit involving his own brother. That suit stems from a failed attempt to commercialize a new treatment for diabetes in the 1990s. American BioScience ultimately paid $24 million to settle the case since the IPO.

The clinical trial itself has been the subject of controversy between the company's backers and short sellers at least since September, when partial results were released, raising questions that temporarily sent the stock reeling.

In May 2002, the company fired its original coordinator, Health Decisions Inc., a North Carolina company that specializes in conducting clinical trials.

Two months later, Health Decisions sued American Pharmaceutical Partners in Los Angeles Superior Court, claiming it was owed at least $3.5 million. The case was later resolved by arbitration and dismissed, but prior to that Soon-Shiong claimed in a signed declaration that Health Decisions did not have the experience it claimed in managing trials and its recruitment of patients in the U.S. by its own admission was "extremely poor.

Executives of Health Decisions and its attorneys did not return calls. But in court documents, Chief Executive Michael Rosenberg contended Soon-Shiong was aware of the difficulty in recruiting patients in the United States, given that he wanted the trial conducted quickly.

Through Lew Phelps, an outside spokesman for American Pharmaceutical Partners with Sitrick & Co., Soon-Shiong declined to discuss the lawsuit.

In the end, the debate may not be answered until the FDA resolves the application for Abraxane's approval. Soon-Shiong has said he expects annual sales of the drug to top $500 million.

But Burstein, the Harvard specialist, said he doubted the drug would ever be more than a niche player. Another cancer drug, Aventis SA's Taxotere, has been shown to be even more effective in a study released last month.