Biopure Admits Its Blood Substitute Will Be Delayed

Updated from 7:42 p.m. EST

Biopure(BPUR - Cramer's Take - Stockpickr) admitted Thursday that problems with its human blood substitute Hemopure are forcing it to delay filing an approval application with U.S. drug regulators for at least six months.

TheStreet.com first reported late last month that a Hemopure delay was likely. Consultants hired by Biopure to assist with its pivotal clinical trial for Hemopure noted numerous, serious problems with data collection and analysis. In addition, TheStreet also reported that a Washington, D.C., law firm was crossing the country interviewing doctors involved with the Hemopure study.

Biopure executives had long maintained that Hemopure's filing would hit the doorsteps of the Food and Drug Administration by year-end. But late Thursday, the company acknowledged that the filing would not occur until the middle of 2002.

In a statement, CEO Carl Rausch says the delay is being caused by FDA questions about a proposed expansion to the company's Cambridge, Mass., manufacturing plant. In his statement Rausch repeated his confidence in Hemopure and in the way Biopure conducted the trial.

"We believe that the data [are] sound and supportive of an approvable product indication, and we continue to prepare for regulatory review and further public reporting of the Phase III data beginning in early 2002," he said.

Safety Concerns

Doctors and consultants familiar with Biopure say that Thursday's acknowledgement of a filing delay might be just a strategy to buy the company time while it figures out how to salvage something positive from a product with serious safety problems. TheStreet has addressed these safety issues extensively over the past several months.

Biopure's own statement gives a hint of possible problems. In lieu of an actual approval application, the company now says that it will submit an "interim safety report for the pivotal Phase III clinical trial to the FDA by year-end."

But Rausch and other Biopure executives said earlier that a full safety analysis of Hemopure already has been completed. On Aug. 27, the company issued a press release stating that an independent committee of experts had conducted a statistical analysis of its Phase 3 data that showed Hemopure was safe.

That raises the following question: If the safety analysis is completed, why is the company now only able to give the FDA an "interim" safety report on Hemopure? Biopure has never released any actual safety data for review by investors or the outside medical community, and the company would not return phone calls seeking answers Thursday.

Biopure concluded its pivotal trial for Hemopure in August 2000, which should have given it plenty of time to get all the data analyzed.

Thursday, Biopure also said that it hopes to meet with the FDA in early 2002 to "confirm the proposed product labeling of Hemopure." The statement is confusing, according to those experienced with the process, because the seemingly positive outcome of the completed trial should have clearly dictated the product's label.

In an earlier report, a doctor familiar with Biopure's work told TheStreet that the company could be trying to retrospectively change its plans for Hemopure by recasting results to give a more positive outlook to the data -- something the FDA frowns upon. This doctor, contacted again Thursday, says the company's statement supports his previous beliefs. This doctor has no position in Biopure.

Cash Shortage

The filing delay for Hemopure -- for whatever the reason -- also puts increasing pressure on Biopure to raise more cash. The company had $48 million in its coffers as of the end of July -- enough to last until July 2002 -- according to its last 10-Q filed with the Securities and Exchange Commission.

But Wall Street sources tell TheStreet that Biopure executives have been trying to raise money since late this summer. Thursday's acknowledgment that there are problems with Hemopure's approval won't make this task any easier.

In August, Biopure -- joined by Salomon Smith Barney bankers -- quietly made the rounds of institutional investors seeking to raise upward of $50 million in a private placement. A Wall Street money manager who was approached by Biopure says the company was able to receive commitments for only about $20 million by the second week of September.

After Sept. 11, the deal was taken off the table. In the following weeks, Biopure and Salomon went their separate ways. Biopure then hired Shoreline Pacific, a boutique investment bank based in Sausalito, Calif., to pick up the fund-raising hunt. But these efforts haven't yielded any results.

Biopure can fall back on a $75 million equity line of credit it has with French bank Societe Generale. But the company has been reluctant to go this route because any money it raises by selling stock to Societe Generale comes with significant costs. The French bank gets the stock at a discount, which it then will sell for a quick profit. But the bank also is allowed to bolster its gains using various shorting strategies that could put even more downward pressure on the stock, according to SEC documents filed that explain the agreement.

Biopure can take down money from the agreement in installments of only about $3 million each.

"This [equity line] agreement is really a fund-raising strategy of last resort," says one fund manager familiar with its details. "Biopure is reluctant to use it, especially given the company's weak stock price." This fund manager is short Biopure.

Shares of Biopure were trading down more than 11% Friday. Since Oct. 11, Biopure shares have fallen 23%, while the American Stock Exchange Biotech Index has risen 22%.