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NeoTherapeutics Closes Books on Its NeoGene Unit

NeoTherapeutics Closes Books on Its NeoGene Unit

HEALTHCARE by Vita Reed

Allergan-backed Study: Botox for Strokes; PacifiCare Arm Signs New Pact

NeoTherapeutics Inc., an Irvine-based drug developer, has pulled the plug on its research and development unit NeoGene Technologies Inc.

“This action to terminate most of NeoGene’s operations was based on our need to reduce expenses and return to our core product-oriented businesses,” Chief Executive Alvin Glasky said. “In our current circumstances, it is not feasible for us to fund NeoGene for the period of time necessary to allow its discoveries to become commercial products.”

NeoGene had been working on drugs to treat neurological, psychiatric and other disorders. NeoTherapeutics expects the move to cut yearly expenses by $2.4 million, said Samuel Gulko, the company’s chief financial officer. That number’s based on NeoGene’s 2001 operating costs.

It’s been an eventful year for Neo-Therapeutics. In May, NeoTherapeutics’ shares plunged after the company said its Neotrofin drug caused no statistical gains in Alzheimer’s patients. NeoTherapeutics switched the focus of its Neotrofin drug from Alzheimer’s to Parkinson’s disease, leading to cuts in staff and operating costs. At that time, officials said NeoTherapeutics’ cash burn rate would be cut to some $14 million a year.

NeoTherapeutics had chewed through cash in its bid to develop drugs for treating central nervous system diseases and cancer. In its annual report, the company said it would need to “seek additional funding by the end of July 2002, or sooner, through public or private financings, including equity financings, and through other arrangements to continue operating our businesses.”

NeoTherapeutics raised $1.1 million in July through the sale of about 6.5 million shares at 17 cents each to four institutional investors. In June, it raised $1.7 million.





In a research report earlier this year, concerns about NeoTherapeutics’ cash position were cited by Oren Levy, an analyst with White Mountain Capital LLC of Nanuet, N.Y. While pointing out that NeoTherapeutics’ funding needs would be “a constant pressure,” Levy wrote that he believed that management would continue to acquire additional financing on favorable terms.

NeoGene researcher: unit closure stands to save $2.4 million a year (right).

NeoTherapeutics’ shares were trading at about 10 cents last week, down from 3.80 earlier in the year. The company counted a market value of around $2.5 million at recent check. The company’s shares have traded as high as near 25, with that peak coming in 2000.

Botox Boost

Irvine-based Allergan Inc.’s Botox neurotoxin may help relieve muscle tightening and twitching seen in some stroke patients, according to researchers.

Researchers at the Indiana University School of Medicine found Botox produced significant improvement in the fingers and wrists of nearly two-thirds of stroke victims who received injections of the neurotoxin. By contrast, only a quarter of subjects who received placebo injections show-ed comparable progress after six weeks. Study results were published in the New England Journal of Medicine.

Among other things, the study noted that benefits from the Botox injections lasted for at least three months. Subsequent testing showed that extra Botox injections produced further gains in the patients, with benefits in many cases lasting 18 to 24 weeks.

A total of 126 volunteers treated at 19 medical facilities in a two-year period made up the study. Allergan paid for the research. The study’s researchers have past or present financial ties to the company.

Botox, which accounted for $112 million of Allergan’s second-quarter sales of $476 million, is perhaps best known as a wrinkle remover, having received Food and Drug Administration approval for cosmetic usage in the second quarter.

Bits and Pieces:

PacifiCare Behavioral Health, Laguna Hills, signed a contract for behavioral healthcare services with Keystone Health Plan Central, Camp Hill, Pa. PacifiCare Behavioral Health is set to offer managed mental health and chemical dependency services to more than 200,000 Keystone enrollees. PacifiCare Behavioral Health is a division of PacifiCare Health Systems Inc., Santa Ana Applied Medical Resources, Rancho Santa Margarita, said it was picked for Inc. Magazine’s Innovation 50 list. The list included businesses with less than $100 million in revenue that had accumulated 30 or more patents between 1996 and 2001 Franek Technologies Inc., Tustin, is providing a laboratory protection security system for the Army’s bioterrorism preparedness system. Beckman Coulter Inc., Fullerton, also is involved in the biological agent testing system.

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