Cancer Hype a Win-Win Situation for Sugen

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LOS ANGELES --

Sugen

(SUGN)

is enjoying taking the highroad.

In the wake of the hysterical reaction in

EntreMed's

(ENMD)

stock after

The New York Times

highlighted its angiogenesis program, all companies working in the arena got much-desired attention, including the small Redwood City, Calif., biotech. Sugen officials got to be the cautious, sober face of cancer research, emphasizing that anti-angiogenesis, which seeks to starve cancer tumors of the blood they need to survive, is in early testing. Meanwhile, the biotech got a sweet boost in its stock price. Since May 1, Sugen shares are up 26% to close Friday at 17 1/8. That's what's known in the impoverished language of Corporate America as a win-win.

In recent weeks, "the phones have been ringing off the hook:

Nightline

,

Dan Rather

,

Time

magazine. It's thrust Sugen into the cancer limelight," says Kevin Kwok, the company's director of business development. But desperate patients called as well, and false hopes for dying people were particularly painful for company officials and researchers. Their research, as with all the anti-angiogenesis programs, is in the early stage, they repeatedly emphasized.

"It's an unfortunate situation. The story itself had all the disclaimers, but the public and the investing public almost created a hysteria," says Kwok.

Referring to some of the more florid language in the

Times

story, Peter Hirth, the company's executive vice president and chairman of Sugen's research and development committee, adds: "Nobody can cure cancer and whoever claims it is an absolute lunatic."

That said, Sugen is one of the leaders in developing new approaches to treat cancer, and it's got a productive R&D effort. The problem is that it's early and, at a roughly $250 million market capitalization, it's not dirt-cheap. The company has two lead compounds: a "signal transduction inhibitor," which blocks the communication that a cancer tumor needs to survive, in a pivotal trial, and an anti-angiogenesis compound in Phase I/II. Both drugs are small molecules given intravenously. SU101, the signal transduction inhibitor, is being studied in patients with a form of brain cancer called glioblastoma compared to

Procarbazine

, a common cancer drug. The patients in the trial have failed on standard care. The company is presenting promising Phase II results of SU101 in brain cancer on Monday here at the

American Society of Clinical Oncology

meeting.

Investigators will take an interim look at the data from that trial, which plans to enroll 380 patients, in the third quarter of next year. The dream case for Sugen is that the results of the interim look are positive, the trial is halted and then the company is allowed to file for approval.

However, one New York hedge fund manager criticized the company for conducting such a large, lengthy study, saying that an efficacy study could be conducted more efficiently. "For a first study, you don't do that, unless you just want to claim to be in the clinic," said the hedge fund manager, speaking on the condition of anonymity.

The company just announced the start of a Phase I/II in SU5416, the anti-angiogenesis compound, in Kaposi's sarcoma, a form of cancer that afflicts AIDS patients. Sugen has data from a Phase I safety study in SU5416 in a variety of cancers being presented here as well.

Of course, Sugen is burning through cash like a bank on fire and won't have a drug on the market until 2000 or 2001. Even then, the two initial markets of glioblastoma and K.S. are small. Sugen's strategy is first to get fast-track approval from the

Food and Drug Administration

and get on the market. Then the company hopes that the benign side-effect profile of what would be breakthrough drugs and additional data in other cancers will lead to use in other cancers. One positive is that the company has not partnered its drugs to Big Pharma and hopes to take the drugs to the U.S. market by itself. Two financings last year, which raised a bit under $50 million, allowed the company to walk away from a corporate deal, says Kwok. "You have to sell your soul for early deals," he says.

Sugen had a little over $68 million at the end of the first quarter and is spending $8 million a quarter, although that's rising as the company has more clinical trials going on. It hopes to bring two more drugs into human trials this year and two more next year.