Chief is stepping down as Tanox drug steps up

Jan. 11--As she prepared for her final Wall Street meeting as the chief executive of Tanox, set for today in San Francisco, Nancy Chang glowed about the company's HIV drug.

"As a company, we are very excited," she said Friday. "This is our second home-run opportunity to take a drug to the market for thousands and thousands of people who can benefit from this drug."

Chang, who co-founded the 20-year-old Houston biotechnology firm and is about to hand over the reins to a successor whom she has groomed for four years, explained: "We see a real product opportunity in this drug."

The data from ongoing human clinical trials, she said, shows it reduces the amount of HIV in the body by about 95 percent.

The drug, which coats the cells HIV is targeting to prevent HIV from entering them, also has few side effects and can be safely combined with other HIV therapies, she said.

Chang, 50, said she is stepping aside as CEO to give young people at the firm "a fresh start."

She will remain as chairwoman.

Danong Chen, who is set to take the helm at Tanox on Feb. 1, is doing the presenting in San Francisco today -- with Chang by her side.

Chen, who met Chang in school at Baylor College of Medicine and who turned 45 last week, will focus on keeping Tanox's profitability pledge: between 2007 and 2009.

"Nancy has spent her life building the company from a concept to where we are today, with a $750 million market cap," Chen said. "The next step is to sell and market our own drugs, and to become profitable."

When Chang took Tanox public in the spring of 2000, it was one of the largest initial public offerings in biotech history.

Working with Genentech and Novartis, Tanox developed Xolair, the first biological therapy for allergic asthma, which was approved for sale in Europe in October.

And since has come good news about Tanox's HIV drug from an ongoing "phase-two" clinical trial with 82 HIV patients at about 25 locations across the country and in Canada. Tanox says because the drug lowers the amount of HIV in the body, it can slow the progression to AIDS.

Still, there are no guarantees as trials of the drug continue.

While Tanox's HIV drug "has been safe to date, toxicity could arise in later stage trials," Lei Zhong, an analyst with Bank of America Securities, wrote in a Dec. 19 research report.

And the marketing alone for the HIV drug could weigh down the finances of Tanox, which has yet to post a profit.

Zhong wrote that while the company has one of the strongest balance sheets in its area and management has been cost-effective in operations, marketing the HIV drug alone will demand extra financial resources, making the issuance of new shares necessary.

Zhong does, however, have a buy rating on Tanox shares, which closed Tuesday at $17.17, up 4 cents. He doesn't own shares in Tanox.

On Dec. 19, he raised his 12-month price target for the firm to $25 from $18. That was Zhong's response to Tanox's submission of phase-two data from the HIV drug -- which it calls TNX-355 -- at the American Society for Microbiology's Interscience Conference on Antimicrobial Agents and Chemotherapy on Dec. 17.

"We believe the results presented at ICAAC underscore the potential of TNX-355 as a leading treatment in later stages of HIV therapy," he wrote.

The HIV drug will now be tested in a larger population, Chen said. In the third phase of clinical trials, drug makers work to replicate safety and effectiveness findings from the first and second phases, respectively. Tanox expects to start the drug's third-phase trials in the second half of this year.

Chang said TNX-355 also is "ideal for people who have accidental exposure" to HIV in hospitals.

Dr. Daniel Kuritzkes, head of the AIDS Research Section of Retroviral Therapeutics at Brigham and Women's Hospital, Harvard Medical School, said Tanox's HIV drug "clearly has anti-HIV activity" but faces huge hurdles to demonstrate its effectiveness for prevention.

"All the studies up until now have looked at people with established HIV infection," said Kuritzkes, who was an investigator in the drug's initial trials but not the most recent clinical trial. He said he owns no Tanox stock. "Whether this drug would be helpful for preventing HIV is something that would need to be tested and proven."

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