Some investors think

Alexion

(ALXN) - Get Report

is placing bets on shifting medical sands.

That's a key issue facing this New England biotech as it prepares to release crucial data on a new cardiovascular drug that could send its stock moving sharply. Tuesday, amid widespread speculation about the data, Alexion shares rallied 12% to close at $61.50.

Alexion and its corporate partner

Procter & Gamble

(PG) - Get Report

are looking to show that their drug, known cryptically as 5G1.1-sc, cuts the incidence of deadly complications following open-heart surgery, an achievement that could mean many millions of dollars in sales. But some doctors are questioning the validity of the tests used to prove that the drug works.

Alexion is wading into a risky and complex area of medicine where others have failed, an area where there is a critical need for new medicines. While some analysts say there's a clear chance of success, some short-sellers who are gambling against New Haven, Conn.-based Alexion say doctors won't go for the drug.

Alexion and P&G's goal is noble. An estimated 20% of all patients in coronary artery bypass graft surgery suffer heart attacks, severe heart failure, strokes or even die, in addition to a host of neurological, liver or other problems. The operation entails grafting a healthy artery, typically from a patient's leg, onto the heart, where a damaged or blocked vessel has been removed. Some 500,000 patients in the U.S. get the operation each year.

Some complications are caused by inflammation from the mechanics of cardiac bypass, which entails diverting blood to heart and lung machines outside the body. In a large, 900-patient clinical trial, Alexion aims to show that its drug cuts this inflammation and reduces deadly problems.

Gentlemen, Start Your Enzymes

But critics say the method Alexion uses to assess some cardiac events, such as heart attack, is flawed because it's founded on the measurement of certain enzymes called CK-MBs. And the value of that measurement is anything but clear.

"There has been much debate on what the expected value of enzymes should be post-op," says the director of one major West Coast university hospital cardiology center who asked to remain anonymous because he hadn't reviewed Alexion's data. He said no "causal relationship" has been shown that an enzyme reduction necessarily means reduced heart damage in such patients. "It remains controversial." Alexion declined repeated requests for comment.

Rise and Fall
Tracking Alexion shares

Furthermore, this doctor said cardiologists are abandoning the use of CK-MB measurement in favor of a new measurement, that of a protein called troponin, which he says was used to diagnose Vice President-elect

Dick Cheney's

recent heart attack. "It's a much more sensitive and specific assay and indicator of heart damage," he says. Cheney would not have been diagnosed with a heart attack using the CK-MB test, he said.

Another physican who runs a New York biotech fund but doesn't hold or short Alexion agreed. Higher enzyme levels, he said, "don't clinically tell you much of anything. Squeezing the heart muscle cause enzymes to release. It doesn't necessarily diagnose heart attack."

Critical Challenge

The debate over the value of enzyme measurement presents a critical challenge for Alexion and Procter & Gamble, because they must prove that the drug works by some means in order to gain approval. And traditional measures of a heart attack, such as electrocardiograms or patient interviews about chest pain, don't work in the days following bypass surgery. But some analysts say Alexion has a leg up in this challenge, because no other drug seems to work in reducing heart attacks after bypass surgery. Hence, by default, doctors and regulators will likely give the drug the benefit of the doubt, these people say.

"The measure of the enzyme is part of the definition of heart attack," says David Webber, an analyst with

Josephthal

who has a buy on Alexion and whose firm does no advising for it. "Reductions in the enzyme mean a lower rate of heart attacks."

And the companies did show in smaller, phase one trials that patients using the drug had a 40% reduction in heart muscle damage. But that figure was only extrapolated from reduced enzyme levels,

J.P. Morgan

analyst Franklin Berger wrote in a recent note. Berger, who says there is a 75% likelihood of positive results from the trial, maintains nonetheless that "an important unknown" is what levels of CK-MBs determine whether a patient has had a heart attack.

The apparent success of the earlier trials has brought in short-sellers, who say the trial design is flawed and that Alexion's valuation is thus in jeopardy. If Alexion reports positive results from the clinical trial, the stock will rally, these people concede. But if the results are negative, the company's $1.1 billion valuation could drop by a much greater degree, these shorts say. Alexion's shares have lost much of their luster since the biotech bubble collapsed last spring, when they traded at $120. And the company is a long way from profits: For the first quarter ended Oct. 31, 2000, Alexion lost a pro forma $8.2 million on sales of $3.3 million.

"If the trial is positive, people will take profits, but if it's negative, it will erase a lot of valuation," says Robert LeBoyer, analyst with

Leerink Swann

, a Boston brokerage with a buy on Alexion, and which does no underwriting for it. "The vast majority of clinical trials fail, so in a down market, it's not that difficult to make a short case for anything."

Plan B

Still, even if the trial in cardiac care fails, the company is testing a version of the same drug in rheumatoid arthritis, a major disease area where treatment has made major strides with new drugs similar to Alexion's, like Enbrel from

Immunex

(IMNX)

and

American Home Products

(AHP)

, and Remicade from

Johnson & Johnson

(JNJ) - Get Report

. Results from that trial are also slated for release in coming weeks.

But if all else fails, Alexion has a secure financial status, with about $375 million in cash in the bank from recent fund raisings to fund its nine clinical trials in various diseases.

"A positive outcome would signal an important medical advance, since no other pharmaceutical agent is available for reducing morbidity in these patients," says analyst Berger at J.P. Morgan, which helped raise cash for both Alexion and Procter & Gamble in recent years. "This trial, with 920 patients, should be large enough to answer the question of efficacy with a high degree of confidence."