San Diego Business Journal

Next month La Jolla Pharmaceutical Co. will start a 300-patient trial that is likely to determine whether its lupus drug candidate is poised for success.

Two analysts said the local biotech firm is well-situated given the uniqueness of the drug.

If approved, LJP 394 would be the first available drug to go after the underlying pathology of the inflammatory disorder lupus, said Tom Dietz, a financial analyst with Pacific Growth Equities in San Francisco.

"There is no effective treatment for lupus," said James McCamant, editor of the Berkeley-based Medical Technology Stock Letter.

Other drugs on the market treat the symptoms of the disease, but no one has found a cure.

Lupus, a sometimes-fatal disorder, causes the immune system to attack the body's own tissue. This leads to painful inflammation while damaging organs, such as the kidney.

Many patients take high doses of steroids and chemotherapy to prevent the onset of inflammation, but then they suffer the severe side-effects caused by these drugs, said Steven Engle, La Jolla Pharmaceutical chairman and CEO.

Dietz said Pacific Growth Equities rated the firm a "long-term buy" based on the premise the drug will work.

He estimated the lupus market will exceed $1 billion, adding about 200,000 patients suffer from severe lupus disease.

He also said last week's news that the U.S. Food and Drug Administration granted the firm orphan drug designation for LJP 394 is not that significant.

McCamant agreed, saying the FDA routinely gives orphan drug status to treatments affecting 200,000 patients or less.

In addition, the seven-year marketing exclusivity of the drug under the Orphan Drug Act only takes effect after the FDA approves the drug, Dietz said.

The real turnaround for La Jolla Pharmaceutical occurred late last year, the analysts said.

That's when the FDA cleared the firm to start another Phase III trial after disappointing results led the firm to halt a Phase II/III trial of LJP 394 in May 1999, he said.

The announcement sent La Jolla Pharmaceutical shares down 51 percent to close at 1 19/32 in May 1999.

The company also lost its partner, Abbott Laboratories located in Abbott Park, Ill., which pumped $700,000 a month into the project.

To save money, La Jolla Pharmaceutical trimmed its staff from 95 employees to 41 workers.

Things began to look up in December when the firm announced it identified a blood test that appears to better predict which patients respond to LJP 394 , a significant problem in earlier studies.

Company stock began to move up.

Since the second half of the year, La Jolla Pharmaceutical shares have been trading in the $6 and $7 range.

On July 19, La Jolla Pharmaceutical raised $29.4 million from the sale of common shares to investors which brings the firm's total cash position to more than $40 million.

That money will last until the beginning of 2002, Engle said. That won't be enough cash to fund the Phase III trial, which Engle anticipates to last until the end of 2002.

Engle said he is also looking for a corporate partner to help launch and market the drug.