Cytogen restructures to focus on peptide agents

Sluggish sales of its flagship monoclonal antibody nuclear imagingagent have prompted Cytogen to restructure operations with anemphasis on development of peptide-based agents. While the Princeton,NJ, company will continue to aggressively market its OncoScintmonoclonal agent for detecting colorectal and ovarian cancer,the company believes peptides are the future of targeted medicalimaging, according to George W. Ebright, chairman and CEO.

Cytogen pinned high hopes on OncoScint after the product becamethe first monoclonal antibody imaging agent to win Food and DrugAdministration approval (SCAN 1/27/93). Sales of OncoScint havenot met the company's expectations, however, despite a thoroughphysician education and marketing effort by the manufacturer andpartner Knoll Pharmaceuticals.

Because of lower than anticipated revenues, Cytogen decidedthis month to reprioritize operations to emphasize products thathave a good chance of success.

"We came to the conclusion that sales of (OncoScint) simplywere not growing quickly enough to support all the activitieswe had under way at Cytogen," Ebright said. "Our approachwas to take a hard strategic look at our key assets and come upwith a plan that would maximize the amount of time we had to capitalizeon those assets to ensure the long-term viability of the company."

Under the restructuring, Cytogen will:

• continue to press its sales and marketing effort forOncoScint;

• complete development of two promising agents in lateclinical research stages; and

• form a separate division to pursue development of molecularrecognition units (MRUs), the company's second-generation peptidetargeted agent research program.

Cytogen took a one-time charge of $750,000 related to the restructuring,and 58 employees were terminated. The company said it expectsrevenues for the third quarter (end-October) to be $2.8 million,of which $520,000 is attributable to sales of OncoScint. Operatingexpenses excluding one-time charges are anticipated to be $9.2million, and the estimated net loss for the quarter is expectedto be $8.4 million.

Cytogen stopped development of several of its monoclonal antibodyagents as part of the restructuring. Those agents included a lungand breast imaging product, a bladder imaging product, an antibodyscreening product and basic research in antibody engineering,according to Ebright.

The two agents that Cytogen will continue to pursue in additionto OncoScint and peptides are a prostate imaging monoclonal antibodyin late phase three clinical studies and a radioisotope for alleviationof pain in patients with bone cancer.

While sales of OncoScint may not be up to snuff, the product'sclinical performance has been stellar, according to Ebright. Nuclearmedicine specialists, however, are still coming to grips withthe technology.

"The tendency (of nuclear medicine physicians) is to under-readthe scan. They look at it, see cancer, and say, `None of the othertests I've ever used here show cancer; I must be reading thiswrong,'" Ebright said. "The irony is that this is exactlywhat this technology does. It finds and pinpoints the extent andlocation of cancer well ahead of any other modality."

Cytogen has also encountered problems regarding Medicare andMedicaid reimbursement for OncoScint. Despite the fact that theHealth Care Financing Administration has approved full reimbursementof OncoScint, some local Medicare and Medicaid offices have notyet received word and are denying reimbursement, Ebright said.Cytogen is working on securing a letter from the national HCFAoffice to clear up the reimbursement confusion.

Cytogen's move to bulk up its peptide program is a dramaticindication of the promise of peptide technology. Because of theirsmaller molecular weight and lower cost, peptides are gainingincreased attention as an alternative to monoclonal antibodies.

Mallinckrodt Medical is the farthest along in the race to bringa peptide-based imaging agent to market. Mallinckrodt is awaitingFDA approval for its OctreoScan imaging agent for detecting tumorsoriginating from neuroendocrine cells (SCAN 6/30/93).

In forming a separate MRU division, Cytogen hopes to focusits peptide imaging agent program. The company tapped co-founderJohn D. Rodwell to head the unit, which will identify promisingpeptides for development, Ebright said. Cytogen is hoping to movea lung and breast MRU agent into clinical trials some time in1994.

While Cytogen remains committed to OncoScint in the short term,the company believes that peptides will eventually make dinosaursout of monoclonal antibodies.

"I think monoclonals will become obsolete, something thatwas an interesting way to get to targeted delivery of product,"Ebright said. "(Peptides) not only will allow us to obsoleteour own technology as we know it today, they will form the basisfor Cytogen to expand into areas other than cancer."