Gary Nei`s confidence kept growing as a panel of advisers to the Food and Drug Administration took evidence about Lyphomed Inc.`s drug to fight AIDS-related pneumonia.
As Lyphomed`s recently named president, Nei was acutely aware that the drug, perhaps the most effective against pneumocystis carinii pneumonia, the most frequent cause of death for AIDS victims, was poised to bring needed income and prestige to the Rosemont-based drug manufacturer.
At the hearing May 1, FDA Commissioner Frank E. Young, who usually does not attend such events, gave an opening statement emphasizing the importance of the discussions.
The panel was presented with two questions: whether to recommend approval of the drug in an aerosol form (it was available in injectable form), and whether the drug sould be approved for use by AIDS victims who had not contracted the pneumonia.
An FDA medical officer urged approval of the drug as a preventive step against the pneumonia, rather than only as a treatment for it.
A gay man with AIDS, whose activist organization helped set up the community-based network for clinical trials of aerosolized pentamidine, praised Lyphomed for developing the drug.
Michael Callen, president of the Community Research Initiative, remarked that those trials were ”paid for by a small pharmaceutical company (Lyphomed) in Illinois.”
Lyphomed ”has received a great deal of criticism from the AIDS activist community for the price increases which it claims were necessary to pay for this research,” Callen said.
”I cannot say whether their price has been justified,” he said, ”but I can say that they were the first company to put their money down in a gamble on an experimental approach to AIDS treatment research. And I believe we`ve all won that gamble.”
The FDA advisory panel justified Nei`s confidence, voting unanimously to recommend approval of the drug in aerosol form and as a preventive step.
Before the vote, Lyphomed stock jumped $1.25 a share, to $18.87, in over- the-counter trading.
For Lyphomed, that day`s events contrasted sharply with the dreariness of most of the last year.
The company had been vilified by some AIDS activists, who claimed that Lyphomed was profiteering at the expense of the afflicted by charging too much for injectable pentamidine, a major treatment for pneumocystis carinii pneumonia.
More damaging to Lyphomed`s bottom line, the FDA had complained about the company`s quality-control procedures, temporarily banned distribution of some of the company`s products and refused to look at its applications to develop or market new drugs.
The result for the high-flying distributor of generic injectable drugs for hospitals had been lost customers, lost sales, lost image and lost shareholder value as the stock price plummeted to less than $10 from $30. The stock was trading around $18.50 last week.
Last month, however, the company reported its first quarterly profit in a year as it sold products that the FDA had released in December from quarantine and resumed making many of the products halted by the FDA last year.
Lyphomed has built inventories that enable it to compete for hospital group supply contracts that will become effective in July, Nei says. But the company continues to ration products that were produced at its closed Orlando plant. Those lines will be transferred to its plant in Grand Island, N.Y.
Of the major hospital groups scared away from the company, all have reinstated Lyphomed as an approved vendor except University Hospital Consortium, a 48-member group based in Oakbrook Terrace.
Key to all this has been establishment of a greatly improved relationship with the FDA.
Lyphomed closed plants in Chicago and Orlando rather than incur the great cost of bringing them into compliance.
”Their other main manufacturing facilities, in Melrose Park and Grand Island, are, for the most part, in compliance in all the major aspects,” said FDA spokesman Bradford Stone.
Nei, who came to Lyphomed in November as president and chief operating officer, will become chief executive May 25.
Nei is a former president of several divisions at American Hospital Supply Corp. who became a group vice president at Baxter International Inc. after the companies merged.
John N. Kapoor, who led a management buyout of the business from Stone Container Corp. in 1981, will remain as Lyphomed chairman.
Nei and Kapoor spent most of last week in Japan, meeting with officials of Fujisawa Pharmaceuticals, which owns 30 percent of Lyphomed.
Nei and Kapoor planned to outline to Fujisawa how Lyphomed, which under Kapoor had grown from selling $4 million of freeze-dried vitamins a year to sales of $173 million by 1987, is transforming itself from a precocious child into an adult player in the sophisticated world of pharmaceutical development and marketing.
They were to tell Fujisawa, for instance, about the company`s three-year strategic plan, Nei said.
”This is the first time Lyphomed has developed a long-range plan,” he said. ”That`s important to do as the company moves forward. We`re not the small entrepreneurial company we were.”
A main component of the plan is the separation of the company into two parts, one for generic drugs and the other for proprietary drugs, which tend to bring higher unit profits, Nei said.
Injectable pentamidine, the company`s first and only fully approved proprietary drug, accounted for $35 million to $45 million of Lyphomed`s $128 million in sales last year, says Bonnie Perkins, vice president and health care analyst for the investment firm Chicago Corp. She estimates sales of both forms of pentamidine will total $55 million this year and $85 million in 1990.
The company has a number of other drugs in the approval pipeline that the FDA reopened to it last fall.
”On the multisource (generic) side,” Nei said, ”we`ll be talking about the rebuilding of production volumes in our plants and about a host of strategies to improve profitability.”
In addition to competing on price, which the company has done aggressively, it plans to offer computer software for hospitals to use in scheduling personnel and managing drug inventories.
The problems Lyphomed experienced with the FDA are by no means unique, says Michael Harshbarger, senior vice president of Hayes & Griffith, a Chicago-based health care investment firm.
”The fact that an FDA problem caused a major disruption in Lyphomed comes as no great surprise to long-term followers of emerging health-care companies,” Harshbarger said.
Kapoor says Floyd Benjamin, hired as Lyphomed`s vice president of scientific affairs, ”played a very important role in getting us through, getting all the validations in place and keeping us in communication with the (FDA).”
”Floyd has had experience in the past,” Kapoor said. ”He was at Abbott Laboratories when Abbott had problems (with the FDA), and subsequent to that he went to McGaw Laboratories, a subsidiary of American Hospital Supply, and was instrumental in assaulting the problems McGaw had with the FDA in these situations.”
Kapoor agrees that Lyphomed needed tighter organization.
”Because of our rapid growth-we acquired Invenex Laboratories in 1985-we went from a one-plant to a three-plant operation. Invenex had its own procedures; Lyphomed had its own. There was never an effort to put all these together. Everybody was devoting his efforts to supporting the growth. Floyd looks at overall quality control and makes sure procedures are uniform throughout the company. Nobody in the plant can be doing anything without the approval of corporate quality control.”
