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T-1249 Fusion Inhibitor Update

This report updates details of my interview with Roche officials about T-1249
and Fuzeon, and the latest Reuters & newswire reported updates. Roche is
planning a conference call with community to discuss these developments.

written by Jules Levin, NATAP

In the news this week, Roche and Trimeris announced a halt to current human
clinical studies for their next generation fusion inhibitor, T-1249, the next
generation T-20. Studies in patients showed T-1249 to be more potent than
Fuzeon & effective against Fuzeon resistance. Thus T-1249 was expected to be the
next generation Fusion inhibitor and to be effective for patients with
resistance to Fuzeon.

A first reaction to the news that studies on T-1249 were put on hold by Roche
& Trimeris was that T-1249 was being cancelled because sales & profits from
T-20 (Fuzeon) were inadequate due to the drug being a self-injectable and
expensive, and therefore not well received by patients and doctors & public
reimbursement authorities. This was the first question I asked Roche officials
in
interviews with the company about the news. Roche denied this was the reason and
insisted that T-1249 formulation was the problem and just the opposite was
true, that they were increasing their commitment to development of Fuzeon and
developing next generation fusion inhibitors reflected by a new agreement &
infusion of capital into this project. The balance of the interview follows and
then the latest Reuters newswire report on this news.

In an interview with Roche officials yesterday, Roche says it is increasing
it's commitment to Fuzeon & to discovering next generation fusion inhibitors
and T- 1249 remains a candidate, says David Reddy, HIV Global Franchise leader
for Roche. "Roche is not pulling back" says Reddy, who has been working in HIV
for 20 years; there are plans to try to improve delivery of Fuzeon, "we
strongly believe in Fuzeon, you can't escape its efficacy & we expect Fuzeon to
take
its rightful place in the standard of care for HIV therapy, we firmly believe
in making Fuzeon a standard of care". You can't argue with the efficacy data
which shows 2-fold improvement in achieving 1 log viral load reduction or <400
copies/ml with Fuzeon, says Reddy.

Although sales for Fuzeon have been disappointing since the product launch,
Roche is increasing its commitment to Fuzeon, as well as to developing next
generation fusion inhibitors.
Fuzeon is administered twice daily by self administered subcutaneous
injection and this has limited its appeal to patients. Because of limited
manufacturing capacity upon launch of Fuzeon the commitment to Fuzeon had som
limitations.
But increased manufacturing capacity allows for expanded commitment to
Fuzeon. Plans for expanded Fuzeon commitment in 2004 is discussed below. This
commitment will address the limiations of Fuzeon administration.

Roche & Trimeris announced yesterday that they reached an agreement to focus
on development of next generation peptides (fusion inhibitors) and to research
improved delivery techniques. Roche researchers in Germany and Palo Alto will
be focusing efforts on this in addition to researchers at Trimeris.

To improve Fuzeon usefulness and convenience of use, a preliminary pilot of
once a day Fuzeon study has been conducted looking at short term
pharmacokinetics and pharmacodynamics study of once daily versus twice daily
administration
of Fuzeon. This study compared the same daily dose of the current 90 mg bid
dose of Fuzeon to using Fuzeon 180 mg once daily. The study has been completed
and results will be reported in early 2004, about mid year. Additional studies
are planned. Reddy of Roche says results will allow further studies but lets
be cautious about over interpreting early results until we conduct larger
studies. A once daily regimen could improve adherence & willingness to use
Fuzeon.

As part of the Roche-Trimeris agreement, researchers at both companies will
be trying to discover next generation peptides (fusion inhibitors). As well
they will try to discover improved techniques for better delivery of the drug.
They will research ways to administer these next generation drugs once daily,
once a week, and perhpaps once a month. Several potential approaches will be
researched.

One approach is to look for ways to attach Fuzeon to proteins or
immunoglobulins to extend the half-life; to discover and utilize proteins and
immunoglobulins that themselves have long half-lifes. Albumin is an example of a
protein
that could be attached to a new molecule (drug candidate) that could extend the
drug half-life and thus reduce the time between administrations of the drug.
Additional proteins or immunoglobulins could be utilized in this way.

Another approach is to discover new molecules (peptides, fusion inhibitors,
drug candidates) that intrinsically will have longer half-lifes and therefore
can be administerd less frequently. Straight chemical modification of a
molecule or peptide or selection of peptide that itself has longer half-life is
an
approach.

Another approach they will be researching is to enhance the half-life of a
drug by using a formulation technology. Examples of this are the enteric coated
formulationof ddI. Another approach to extend drug half-life and reduce
frequency of drug administration is to consider the method of drug boosting, as
is
done by boosting drug levels of one protease inhibitor by ritonavir.

Pegylation is a way to enhance & extend release of adrug. This technique has
been used successfully with interferon for hepatitis C treatment. Pegylation
has been looked at but does not give them enough. Other approaches appear more
promising but pegylation has not been abandoned.

Discovering or developing a molecule with a longer half-life and coupling it
with an extended release technique or a formulation technique that extends
hail-life is another approach to finding a new & more effective way to deliver a
fusion inhibitor with potency and less refquent adminstration. Reddy says
some progress has been made in this area. Again, once a week or monthly
administration has been suggested as a possibility.

Reddy says overall resources are being substantially increased for research
collaboration to look for next generation peptides & delivery and increase is
substantial. Overall, the number of researchers dedicated to this will be
increased. As part of agreement between Roche & Trimeris the number of
researchers
will be increased, support level will be increased. Employee cutbacks may
occur in other areas such as administrative or in clinical development. Trimeris
has realligned workforce to focus on research.

New plans for Fuzon in 2004 are being implemented. On the Fuzeon supply
front, Reddy says manufacturing capacity for Fuzeon is ahead of where it was
expected to be, plans are to increase capacity at there plant in Colorado; we
feel
secure on the supply front. Since manufacturing and supply will be improved,
Fuzeon marketing campaign and education programs will be intensified. There will
be educational and marketing campaign directed towards clinicians, patients,
and community-based organizations. There are plans for educational programs
for AIDS service organiztions and patients directed to help in support of ways
to improve use and understanding of Fuzeon.

Roche & Trineris are planning to launch nursing support programs to
facilitate easier administration of Fuzeon & to provide additional support once
treatment has started. The first program is for patients intiating therapy &
offers
virtually full time support and including a hotline where a nurse can be called
to advise about drug preperation & administration, and to provide guidance
for management of Fuzeon and care issues. A nationwide team of specially trained
nurses on preperation and adminstration of Fuzeon will be provided. They will
travel to doctor offices & to patient homes. This will be free of charge,
starting 2004.

Up until now Fuzeon has been distributed through a single provider because of
manufacturing and supply limits, so they could track patient use to make sure
patients had continuous supply of drug. With improved supply distribution
will expand to a more normal distribution using speciality distributors. This is
expected to increase access and convenience for doctors and patients.

In recent years drug pricing and access drugs in developing nations has
received much attention and Reddy was asked about the impact of these concerns.
The HIV & drug environment is changing due to price & profit pressure. Reddy
said, with regards to HIV Roche has recognized international issues & has
adjusted its policy. We have had to change pricing & patent policy for HIV drugs
&
this is right thing to do to accomodate international access & to help price
pressure in developing countries. Reddy went on to say that in the Western world
HIV pharma is a business & a high risk endeavor. We must derive the profits
that allow us to accept risk & accept failures that occur. And to generate
profit & return investment for shareholders. This is important in each disease
area
including HIV. There are more complexities in HIV than in other diseases and
Roche & other companies have worked through this. We've devised ways to
innovate & continue in these areas. We expect that innovations will be rewarded.
As
examples Reddy described an HIV program failure and costs associated with
Fuzeon development. Roche conducted research into developing an HIV TAT
antagonist
which was a failure because effectiveness was not found. The Fuzeon program
cost has been upwards of 800 million Swiss francs (600+ million US) for
research and development for Roche & Trimeris to develop Fuzeon and this number
does
not include phase III/IV marketing & promotion, surveillance studies,
manufacturing expansion. This were bare costs for manufacturing and 500 person
years
of clinical activity.

Here are newswire reports on T-1249 news.

Roche, Trimeris expand HIV research cooperation, T-1249 trials on hold UPDATE

ZURICH (AFX) - Roche Holding AG and Trimeris Inc will expand their research
cooperation in the area of the next generation of HIV fusion inhibitors, Roche
said.

The agreement will focus on improving the formulation and delivery
technologies to enable less frequent administration, as well as the discovery of
new
fusion inhibitors with better efficacy and resistance profile.

The cooperation will include Roche's marketed Fuzeon HIV fusion inhibitor.

Trials with the molecule T-1249 have however been put on hold "due to
challenges with achieving the technical profile required of the current
formulation".

UPDATE 1-Roche, Trimeris deny burying HIV drug failure news
Tue January 6, 2004 05:03 PM ET

By Ransdell Pierson

NEW YORK, Jan 6 (Reuters) - Roche Holding AG and Trimeris Inc. (TRMS.O:
Quote, Profile, Research) on Tuesday denied accusations by industry analysts
that
they buried news about the failure of their new HIV drug in a news release that
seemed to be about something else.

The headline and first two paragraphs of the release late on Monday announced
that Swiss drugmaker Roche (ROG.VX: Quote, Profile, Research) and Trimeris, a
tiny biotech company based in Durham, North Carolina, would continue working
together to develop so-called fusion inhibitors to block the virus that causes
AIDS.

A single sentence at the end of the third paragraph noted the companies had
halted clinical trials of T-1249, the only experimental medicine in Trimeris'
pipeline.

"If you're not a savvy investor you'll get screwed by reading a press release
like that," said Edward Nash, a biotech analyst for Legg Mason.

Alert investors nonetheless bailed out of Trimeris' stock, pushing it down
more than 10 percent in after-hours trading almost immediately after the 4 p.m.
press release on Monday. The stock continued to fall on Tuesday, touching
$16.60 -- its lowest point since October 1999.

The release, which did not detail the problems seen with the new medicine,
concluded by describing Trimeris' excitement about expanding its research
partnership with Roche to discover new formulations of fusion inhibitors.

"They buried the bad news about T-1249, and that's terrible because there's
nothing remaining in Trimeris' pipeline now," said Leerink Swann analyst Ron
Ellis. "They were trying to accomplish damage control."

Trimeris Chief Executive Dani Bolognesi said the release, which was jointly
produced by Trimeris and Roche and reviewed by senior officials of both
drugmakers, was strictly above board.

"We certainly weren't trying to hide any of the news. It clearly is in the
body of the press release," he told Reuters.

Instead, Bolognesi said the companies meant to signal their commitment to
develop a new generation of HIV fusion inhibitors that are easier to administer
than the one, called Fuzeon, that Roche and Trimeris launched early last year.


Ellis said while an individual investor might not spot hard-to-find bad news
in a press release, investors as a group are efficient and usually pinpoint
it. "At some point the news comes out."

Legg Mason's Nash said he believed Roche and Trimeris attempted to draw
attention away from the failure of T-1249 by focusing instead in glowing terms
about their continued relationship.

"But T-1249 was the most important news from the standpoint of investors, who
wanted to know why they're not working on the drug and what's wrong with it
and why it doesn't work," Nash said.

Nash said experienced biotech investors, especially those that had studied
Trimeris for years, would have realized the need to sift through the entire
press release and would have realized it spelled trouble for Trimeris.

Roche spokesman Alexander Klauser defended the release, saying the setback
for T-1249 was less worthy of top billing than the expanded research agreement
between the two drugmakers.

"It was transparent and straightforward," he said, adding that the
discontinuation of clinical trials for T-1249 was "not bad news."

"It is only on hold. It's not stopped," Klauser said, adding that trials of
the drug could be resumed years from now.

Trimeris' CEO said demand for Fuzeon has been hobbled by the need to take two
injections of the medicine every day and reluctance by some insurers to cover
the $20,000-a-year product.

Bolognesi said Trimeris and Roche hope to develop HIV fusion inhibitors that
can be taken far less frequently, including possibly a reformulated version of
T-1249, but that it will take years to test them and get them to market.

Trimeris closed down $2.93, or 14.5 percent, at $17.31 on Nasdaq. Shares of
Roche, which sells a wide array of medicines, eased 0.4 percent to 124.50 Swiss
francs.


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