San Diego Business Journal

After a lengthy struggle with the Food and Drug Administration, San Diego-based Avanir Pharmaceuticals Inc. has been told it won't need to supply additional data to get its oral herpes drug approved.

Provided the FDA's audit of the data goes smoothly, the treatment, docosanol, could be approved within weeks, predicts Gerald Yakatan, Avanir's president and chief executive.

Yet, analysts still see great challenges ahead for the troubled biotech.

One analyst expressed concerns that Avanir may be blowing its victory horn too soon.

First, a company recap: Last month, Avanir ended a longstanding court battle involving David Katz, the ousted company founder.

Avanir won $9 million in damages from Katz for mismanagement; Katz won $6.7 million for defamatory public statements made about him.

Avanir's stock fell as low as 27 cents in October from $2.75 in December 1998, following repeated setbacks with the FDA, which in turn led investors to dump the stock.

On July 9 Avanir cut its staff from 28 to 17 workers to save money. In September, Nasdaq delisted Avanir's stock. The stock has since traded over the counter.

The FDA declined to approve the drug as late as September, demanding additional data.

But Yakatan appealed the FDA's decision to a higher level within the agency. Last week, Yakatan was told by Dr. Janet Woodcook, director for the agency's Center for Drug Evaluation and Research, that "the company's clinical data on the effectiveness of docosanol in treating recurrent oral-facial herpes would be sufficient for approval pending an acceptable audit of the data," Avanir reported.

Investors responded positively to the news, sending the stock up to 84 cents Nov. 1 from 31 cents Oct. 29.

Fariba F. Ghodsian, analyst for Cruttenden Roth Inc. in Los Angeles, said Avanir shouldn't hype its stock, adding, "They shouldn't publicize every conversation they had with the FDA, but instead wait for more concrete information."

Yakatan said it's unfortunate that people focus on the financial situation, and not on the event.

"There are few small biotech firms with approved products in San Diego."

He hopes the FDA will audit the data by the end of this year, adding that Avanir must also negotiate labeling.

The firm had initially sought approval of docosanol as a prescription drug, but the FDA is considering given the product over-the-counter status.

That's also good news, Yakatan said, because it will make the product available to a wider population. He added that Avanir is discussing funding opportunities with investors in New York.

Avanir is also looking for a pharmaceutical marketing partner, but would also launch docosanol itself.

James McCamant, editor of the Berkeley-based Medical Technology Stock Letter, remains skeptical.

McCamant said, "They don't have the money to market the drug nor a partner , we'll just have to see what happens."

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New Beginnings: Plant scientists from UCSD, Salk, and the Scripps Research Institute have planted the seeds to work more closely with local ag-biotech firms as a way to extend funding.

On Oct. 29 the Salk Institute invited scientists to inaugurate the collaboration between academic and industrial scientists on UCSD's campus in La Jolla.

The San Diego Center for Molecular Agriculture is not a physical building, but representative of the collaboration between 15 basic scientists and future collaborators, said Maarten Chrispeels, UCSD professor of biology and director of the new center.

The effort aims at making ag-biotech firms aware that basic plant researchers could help them develop products for the marketplace.

"Basic scientists aren't trained to understand plant growth in the laboratory condition," said Detlef Weigel, an associate professor at Salk. "This is a meeting of the minds so that basic scientists know what kinds of traits are important for agriculture and industry scientists know what kind of basic research is being done."

Public-private collaborations represent additional sources of funding for scientists, Weigel said. And provided a product hits the market, it means more money for the university, he added.

Chrispeels said so far, the group has received about $3 million in federal funding and fellowships. About 20 percent of the money stems from private firms.