A Year and Counting, and Hemopure's Safety Still Unknown

Updated from 7:28 a.m.

Why is it taking Biopure(BPUR Quote) so long to tell investors if its human blood substitute is safe enough to pass muster with U.S. drug regulators?

Biopure's oxygen-carrying red blood cell substitute, dubbed Hemopure, was touted on the CBS Evening News in late July, and last week was the beneficiary of a $7 million research appropriation request from a South Carolina congressman (whose district would host a proposed $85 million Biopure plant).

All the buzz is misleading. TheStreet.com has uncovered mounting evidence that Hemopure is unsafe and that Biopure officials appear to be scrambling for ways to portray the drug in a more positive light. Rejection of Hemopure by federal drug regulators would seriously imperil Biopure's finances, because the blood substitute is virtually its sole product.

The risk that regulators reject Hemopure is high because safety is the most critical determining factor in whether or not the blood substitute gets the green light from the U.S. Food and Drug Administration. Regulators are requiring Hemopure and other experimental blood substitutes to be as safe as red blood cells in order to gain approval -- a very high standard, given the safety of the blood supply.

Can Biopure clear this daunting regulatory hurdle? At this point, the company appears to be stumbling:

Investors still are waiting for Biopure to release the results of its safety tests for Hemopure -- one year after the testing was completed. That's twice as long as most biotech firms take to release such information.

TheStreet.com has uncovered additional patients who suffered from temporary kidney failure and other complications after Hemopure was administered to them.

Biopure is quietly making the rounds on Wall Street, seeking to raise more cash -- a sign that the company is looking to cushion the blow of impending bad news.

A little-known study of Hemopure conducted by German doctors in the mid-1990s gave the product a failing grade and foreshadowed some of its current problems.

Biopure spokesman Doug Sayles insists that Hemopure is proving to be both safe and effective -- enough so that the company expects to file an application for the product's approval with the FDA as early as September.

"Yes, the process is taking longer than we expected, mainly because of the complexity of the trials," Sayles says. "But the implication that we know about Hemopure's safety and are delaying the release because we don't want the information to get out is incorrect."

A Waiting Game

The uncertainty and delay are taking their toll on the stock. Biopure shareholders have been on a wild ride this year, with shares jumping from a low of $10.63 on March 22 to as high as $32.70 on May 9. The stock is currently hovering around $20, reflecting impatience over the time it's taking to get a complete picture of Hemopure's prospects. Short-sellers control 21.5% of the company's float, making Biopure one of the biotech sector's most popular short plays. In Wednesday trading, Biopure shares are off $2.85, or 14.4%, to $16.90 per share. Shares have traded as low as $16.50 per share.

Biopure's Wild Ride The delay has had its effect on Biopure's stock

So, again, why have 12 months passed without any real insight into what happens to patients when they're given Hemopure? All the questions swirling around Biopure would be answered if the company gave investors and the medical community some information about Hemopure's safety.

But it's just not that simple, claims Sayles. The safety analysis has been slow to progress because the study is complicated, he says. And the company is navigating uncharted waters, he adds, because Hemopure is not the only product on trial. By comparing the blood substitute to red blood cells, head to head, the study is one of the first to really test the safety and efficacy of red blood cells as well.

"People assume that receiving red blood cells is safe, but I think you'll be surprised at what you see when our results are released," says Sayles.

One source, a doctor with first-hand knowledge of Biopure's work with Hemopure, says another reason for the delay is that the company is trying to figure out a way to put the most positive light on the results. In other words, the company is reworking the safety data, possibly by finding a subgroup of patients or circumstances where the safety profile of Hemopure is clean.

"Unfortunately for Biopure, the FDA is not going to be interested in the company's 'analysis,' or subgroup analysis of the safety data," says this source, who asked to remain anonymous but has no financial interest in Biopure.

"The agency is simply going to look at the raw data and do their own safety analysis," he adds. "If Biopure is trying to do a subgroup analysis, that suggests there might be a problem with the data." When asked, Sayles would not detail how the company was handling its safety data. "Companies slice and dice data to look at different [patient] populations all the time," he says.

And Sayles blames the FDA, saying that one of the reasons Biopure can't release results publicly as quickly as it would like is because U.S. drug regulators want to see the data first.

"The FDA would be angry if we released the safety data publicly without giving it to them first," he says.

Well, Dr. Abdul Alayash, head of the blood substitute research program at the FDA, and one of the regulators who will ultimately decide Hemopure's fate, seems to contradict Biopure's explanations.

Asked if blood's safety is also being examined, Alayash replies, "Not really. We're addressing hemoglobin substitutes, we're not dealing with the safety of blood. The current blood supply is very safe, so my concerns are not with blood but with [blood substitutes]."

And does the FDA really need to see Biopure's results before they're released publicly?

No, says Alayash.

"Companies can publish or release scientific data whenever or wherever they want," he says. "The FDA wouldn't require companies to give the agency a look at the data before it's released publicly."

The problem for Biopure is that the data may be damaging to Hemopure's prospects.

Side Effects

In May, TheStreet.com reported that patients receiving the blood substitute experienced negative side effects, including three patients who lapsed into temporary kidney failure, according to sources familiar with late-stage tests. At the time, Biopure executives disavowed any knowledge of serious side effects in Hemopure patients, adding that an independent committee of doctors and researchers hired by a consultant to the company was still in the process of analyzing the product's safety data.

Over the past two months, TheStreet.com has verified an additional case of a patient suffering from temporary kidney failure after receiving Hemopure, according to a doctor who treated the patient. There are two more kidney failure cases among patients as well, according to a doctor who shared information with Hemopure researchers. The severity of the kidney failure cases varied, but at least some of the patients were forced to undergo dialysis until their kidneys recovered. Still other patients had to be quickly taken off Hemopure after their blood pressure spiked to dangerous levels, according to doctors who treated patients and other sources familiar with the tests.

In general, Alayash said, attempts over the past 50 years to develop viable blood substitutes have failed because the products have never proven to be as safe as blood. One of the biggest problems: Blood substitutes seem to cause a patient's blood pressure to rise suddenly as capillaries that carry oxygen to various parts of the body constrict. Kidneys are especially susceptible to this so-called vasoconstriction, which starves the organ of oxygen and can lead to failure.

"This is a major issue and an obvious concern because we know so little about how these products work," says Alayash. "We are going to look extra hard at these products because of their safety profile. We're continuously finding surprises after surprises and discovering new issues."

On Tuesday, Biopure rival Hemosol(HMSL Quote) was forced to delay, possibly even restart, its human blood substitute trials after FDA regulators asked the company to make significant changes to its testing procedures. Regulators want Hemosol to test its experimental product on a wider swath of patients in order to justify its safety and efficacy.

As an FDA regulator charged with overseeing the approval of blood substitutes, Alayash would not discuss Hemopure or its chance for success. But Hemopure appears to be running into exactly the same trouble that has doomed rivals in the past. This week's FDA action against Hemosol only heightens Biopure's risk of a major setback.

Hemopure's safety concerns have existed for years and have been documented. One little-known study of 24 surgical patients conducted by German doctors in the mid-1990s, and published in the medical journal Anesthesia Analgesia in 1998, gave Biopure a failing grade.

At clinically relevant -- or real world -- doses, Hemopure succeeds in carrying oxygen to a patient's tissues. But "the advantage of increased oxygen-carrying capacity was offset by increased vascular resistance and reduced cardiac output," the study concluded. Simply put, patients receiving Hemopure suffered from constricted blood vessels and elevated blood pressure -- the same sort of side effects that could be leading to the multiple cases of kidney failure found in later studies.

Biopure executives have downplayed the German study, neglecting to cite it in press releases and regulatory filings in favor of studies that show Hemopure in a more favorable light. Biopure's Sayles says the study is flawed because it only measured patients' response at a single point in time, which negatively skewed the results.

But German drugmaker B. Braun Melsungen partially funded the study, and used its negative findings to dissolve a partnership with Biopure to develop and market Hemopure in Europe, according to sources familiar with the deal. At the time, Biopure executives said the termination of its agreement with B. Braun in 1997 was a mutual decision.

A Wall Street Tour

The outward confidence expressed by Biopure executives in Hemopure's future also doesn't explain why the company -- joined by Salomon Smith Barney bankers -- is quietly making its way around Wall Street seeking upwards of $50 million in a private placement. This deal is separate from a recently announced $75 million equity line stock purchase agreement inked between Biopure and French bank Societe Generale in June.

The timing of the fund-raising excursion -- confirmed by several Wall Street investment managers who have listened to the sales pitch -- is curious because biotech firms usually wait for the release of positive news before rushing out to raise cash. Equally unusual are the terms of the private placement, which is offering a select group of institutional fund managers shares in Biopure at a significant discount to its current market price.

This raises the following question: If the pending news about Hemopure is so good and the chance for an FDA approval so strong, why isn't the company waiting for its stock price to soar in order to raise even more cash and at far more advantageous terms?

Biopure spokesman Sayles wouldn't comment specifically on the private placement. "We evaluate various financing opportunities all the time," he says, adding that there wouldn't be anything unusual if the company was to raise money.

But there's another explanation. Biopure is trying to raise as much cash as it can -- call it a life preserver -- before it's forced to concede Hemopure's failings. The company is particularly vulnerable because Hemopure is its only product with real growth potential. The company sells a version of Hemopure used by veterinarians, but sales of that product are minuscule and certainly don't justify the company's $500 million market value.

So, is Hemopure bad blood or good medicine? Twelve months later, Biopure still isn't giving investors a clear answer.