PROFIT FROM PAIN

Pain Therapeutics Betting On Next-Generation Pain Killers

The drug industry has come light-years from the days when pain was
regarded as something to be grimly endured, rather than overcome.

Treating everything from headaches to the agony of cancer has become
a multibillion-dollar business. Yet many medicines sold to help the
50 million Americans suffering from one hurt or another have
shortcomings that give companies such as Pain Therapeutics a huge opportunity.

The South San Francisco company has two pain drugs in late-stage
tests that could prove highly profitable if they get approval from
the U.S. Food and Drug Administration. And they could give people
relief from pain without having to worry about becoming addicted.

Although some analysts are skeptical about one of the drugs, Oxytrex,
Pain Therapeutic's founder and chief executive, Remi Barbier, is
undeterred. He believes annual sales of the drug, which is formulated
to eliminate the addictive qualities and withdrawal effects of opiate
painkillers, could hit $1.5 billion.

"What Vioxx and Celebrex did for mild painkillers, that's exactly
what we think Oxytrex can do for severe pain," Barbier said. He
added, "Of course, we're going to do it right, without all the
mistakes of Vioxx and Celebrex," which have triggered hundreds of
lawsuits over their alleged side effects.

Opioids, such as morphine, long have been known to block the
transmission of pain signals by nerve cells so the brain, in effect,
doesn't sense pain. But scientists say repeated opioid use also can
have a contradictory effect.

They say it stimulates nerve cells in a way that makes them more
sensitive to pain, so people need larger amounts of the opioid
painkiller to feel its effect. That triggers withdrawal pains if they
quit the drug.

Boosting Potency

Based on work by researchers at Albert Einstein College of Medicine
in New York, Pain Therapeutics claims adding a second ingredient, a
so-called antagonist named naltrexone, avoids stimulating these nerve
cells. This boosts the painkiller's potency, while lessening the
patient's drug tolerance and withdrawal symptoms, the company says.

When 719 patients with severe back pain took Oxytrex, half had less
dependence and withdrawal symptoms than patients on the same opioid
without naltrexone, Pain Therapeutics reported last year.

But a second test of Oxytrex had to be suspended, the company said in
November. In that test, Barbier said the FDA required patients be
given a large dose of Oxytrex, without letting them gradually become
accustomed to the drug. Consequently, many of the patients developed
nausea or other unpleasant side effects that prompted them to quit the study.

Barbier said the FDA has agreed to let Pain Therapeutics develop
another test where patients won't risk getting such side effects.

The company's other drug, Remoxy, has won enthusiastic reviews from
some analysts and the company estimates its potential annual sales at
$1 billion.

It is designed to combat the growing problem of prescription drugs
being diverted to addicts who then alter the pills to get euphoric
highs. One drug that has been especially abused this way is
OxyContin, a widely prescribed opioid for moderate-to-severe pain.

About 4.4 million Americans used narcotic pain relievers for
non-medical uses in 2004, the most recent data available, according
to Leah Young, spokeswoman for the federal Substance Abuse and Mental
Health Services Administration. Of those, 325,000 used OxyContin, she
said, and growing numbers of opioid abusers are winding up in emergency rooms.

Drug addicts can easily crush or otherwise break down time-release
tablets of OxyContin into a form that can be snorted or injected for
an intense high. But Remoxy, which contains the same opioid as
OxyContin, has a sticky composition that resists injecting or snorting.

The company is counting on doctors taking their patients off other
painkillers and putting them on Remoxy, if the drug is approved for
sale, to lessen the likelihood of opioid abuse.

King Pharmaceuticals of Tennessee is betting that will happen, too.
It announced in November that it will kick in $400 million to help
Pain Therapeutics develop Remoxy and other abuse-resistant
painkillers. Under the deal, Pain Therapeutics gets 15 percent of the
first $1 billion in Remoxy sales and 20 percent after that. Barbier
hopes to win FDA approval for Remoxy in 2008.

Few Competitors

Some other companies, including Progenics Pharmaceuticals of New
York, are developing opioid painkillers with naltrexone to ease
constipation, another common side effect. But Pain Therapeutics seems
to have few direct competitors, which is a plus with some analysts,
though they tend to be more excited about Remoxy than Oxytrex.

"I'm less confident about Oxytrex," said Kate Winkler, of Global
Crown Capital, who said she owns no Pain Therapeutics stock. "I'm not
altogether optimistic that it's going to be approved."

That was seconded by Dr. George Fulop, vice president of
biotechnology and life sciences equity research for Needham &
Company, who also owns no Pain Therapeutics stock.

While agreeing with Pain Therapeutics that Remoxy "is a
billion-dollar potential drug," Fulop added, "I'm more conservative
with regard to assuming what Oxytrex can do." He pegged Oxytrex's
likely sales at $150 million to $300 million, well below the
company's estimate.

However, Dr. Raymond Gaeta, director of Stanford Medical Center's
pain management unit, sees a big need for Oxytrex and he praised Pain
Therapeutics for the way the company developed it.

"They've really done some good science," he said.

That's not to say it hasn't been a struggle for the company.

Pain Therapeutics, which lost nearly $31 million last year, hasn't
been profitable since it incorporated in May 1998. The company also
had to discontinue work in December on another drug it developed for
treating irritable bowel syndrome after the medicine failed to show
enough benefit in a clinical test.

Reason For Optimism

But Barbier, who has worked at several other biotech companies,
including Exelixis of South San Francisco, where he was chief
operating officer, doesn't sound concerned.

He said failure is to be expected in drug development, which he
likened to "looking for oil." He's already on the prowl for other
products Pain Therapeutics can develop, including possible cancer
treatments, and plans to add up to 10 people this year, bringing the
company's workforce to about 50.

But pain relief is the company's major focus for now.

"How many times have we heard patients who have a legitimate need for
painkillers say, 'Oh, I don't want to take the painkiller, because I
don't want to become an addict?' " Barbier said. "We thought there
had to be a better way."