Regulatory turmoil forces Neoprobe to cut back staff and shift strategies

March 4, 1998

Company will focus on products with highest paybackIntraoperative probe developer Neoprobe of Dublin, OH, has trimmed its staff by 20% and refocused its remaining resources on products either on the market or close to regulatory clearance. This

Company will focus on products with highest payback

Intraoperative probe developer Neoprobe of Dublin, OH, has trimmed its staff by 20% and refocused its remaining resources on products either on the market or close to regulatory clearance. This strategic shift comes largely in response to requests from authorities in Europe and the U.S. for additional submissions of clinical and production data related to RIGScan CR49, a monoclonal antibody-based radiopharmaceutical intended for use in the surgical detection of metastatic colorectal cancer.

Neoprobe develops probes used to detect radiopharmaceuticals during surgical procedures, and the company's products can detect a range of commercially available radiotracers, such as indium-111, iodine-125, and technetium-99m. The company's long-term strategic plan, however, involves the development of the RIGScan procedure, in which the firm's probes are used to detect its own internally developed monoclonal antibody-based agents (SCAN 2/24/93). Monoclonal antibodies are generally considered more suitable than conventional radioisotopes for homing in on disease sites.

Neoprobe's long-range plans have been slowed due to difficulties in both Europe and the U.S. in the review of the CR49 monoclonal antibody. In December, the Food and Drug Administration requested additional information as an amendment to CR49's biologics license application (BLA), stating that it could not approve the BLA until the information was provided. The prior month, Neoprobe received similar news from the European Agency for the Evaluation of Medicinal Products, a move that prompted the company to withdraw its marketing application for CR49 and begin work on a new one.

The regulatory bad news battered the company's stock, which has dropped from above $12 a share in November to around $4.38 in late February. The news has also prompted Neoprobe to refocus its R&D emphasis, according to David Bupp, president and CEO.

"Certainly, the request by the FDA for additional information led us to the strategic review of our business, in order to make sure we maximize our best chances of success and the maximum commercial opportunity. We need to focus and direct our activities to (products that have) the highest payback," he said.

Part of the reorganization at Neoprobe involved Bupp's elevation last month from president and COO to his current position. John Ridihalgh, former chairman and CEO, became chairman and chief scientific officer.

The company's latest probe product, the Neoprobe 1500 Portable Radioisotope Detector, was launched in October, providing a substantial boost to the company's revenues in the fourth quarter of 1997 (end-December), Bupp said. Fourth-quarter revenues rose about 40% over the third quarter of that same year and nearly tripled year to year, from $583,000 in the fourth quarter of 1996 to $1.7 million.

"Our new product certainly was well received by the surgical and medical community," he said.

Much of Neoprobe's past R&D efforts have been focused on RIGScan products further back in the research pipeline, Bupp said. These efforts have been cut back or rescheduled.

"What we have done is postpone or defer the research activities associated with those products," he said.

The company will continue to focus R&D resources on attaining market certification for RIGScan CR49, as well as for Neoprobe's first therapeutic product, activated cellular therapy (ACT) for cancer and viral diseases. ACT involves the use of a RIGS probe to detect lymph nodes with a high level of tumor-specific lymphocytes; the surgical removal of the lymph nodes; and then the activation and expansion of these lymphocytes and their reinfusion to enhance the patient's immune response to cancer.

Neoprobe 1500 differs from the company's older detector technology in that the probe works well with high-energy isotopes such as technetium. Previously, the company's probe was optimized for low-energy isotopes like iodine. Technetium is a readily available and less expensive isotope for hospitals.

Use of the probe in intraoperative lymphatic mapping has radically altered the practice of breast cancer surgery, allowing for less invasive extraction of lymph nodes, Bupp said. This reduces hospital times substantially, often allowing surgery to be performed on an outpatient basis with local anesthesia.