AVI BioPharma CEO Chris Garabedian is rethinking the company’s strategy of retaining full ownership of its lead candidate, Eteplirsen for Duchenne muscular systrophy (DMD), following mixed results in a recent Phase II trial.

“Coming out of this week’s news, I’m considering different options than I might have previously, in terms of considering a partnership,” Garabedian told Xconomy. Those options, he said, include a possible partnership with a pharma giant capable of sustaining development of Eteplirsen, in return for at least partial ownership stake in the drug.

“There was a lot of partnership interest before the data—and there have been a lot of e-mails from partners after. A lot of pharma companies are encouraged by the dystrophin data. And they have large balance sheets, and the ability to fund a pivotal study,” Garabedian added.

Eteplirsen is designed to fight DMD by making up for the protein abnormality that underlies the disease rather than just treating symptoms. When Eteplirsen was administered once weekly at 30 mg/kg over 24 weeks to boys with DMD, results showed that it could produce a statistically significant amount of new dystrophin (22.5% dystrophin-positive fibers as a percentage of normal) compared to no increase in a placebo control group.

“The fact we can have 20 percent of normal dystrophin showing up in a muscle cell where there was none before, is remarkable,” Debra Miller, co-founder and president of patient advocacy group CureDuchenne, told Xconomy.

However, a shorter 12-week duration of Eteplirsen treatment did not show a significant increase in novel dystrophin (0.79% dystrophin-positive fibers as a percentage of normal), despite the drug being administered at a higher dose of 50 mg/kg once weekly: “This finding suggests that a longer duration of dosing is required before meaningful levels of dystrophin are produced,” AVI stated Monday when it announced the results. Additionally, there were no significant improvements in clinical outcomes after 24 weeks in the treated patients compared to placebo when doctors measured how far the boys could walk in a six-minute test.

That didn’t stop the company from presenting the results in the best light in its announcement, which emphasized Eteplirsen met its primary efficacy endpoint. “We anticipate that [the 30 mg/kg weekly dosage] levels of dystrophin could lead to significant clinical benefit if maintained over a longer course of treatment,” Jerry Mendell, M.D., director of the Centers for Gene Therapy and Muscular Dystrophy at Nationwide Children’s Hospital and principal investigator of the Phase IIb study, stated. “This study represents a major advance in the field of DMD research.

AVI had planned to initiate a Phase III trial by the end of this year and may still pursue that path if the company generates more positive news from a follow-up analysis of patients after 48 weeks of treatment. But Garabedian acknowledged that the company, whose market capitalization has dipped from $150 million to $137 million in recent days, would find it hard to raise the capital needed for the late-stage program.

“A pivotal trial would probably require two more years of capital. We’ll have to put all options on the table, and consider the trade-offs,” Garabedian added. “My vision of the company when I came on board still holds true, but the realities of the marketplace sometimes constrain you.”

Those realities include a 30% drop in AVI’s share price since Monday to $1.01 as of Thursday (followed by a 6-cent rise in after-hours trading). AVI finished last year with operating losses of $35.9 million, not counting a $1.1 million charge related to the layoffs, compared with a $20.9 million operating loss for 2010.

The layoffs were executed three months before the mixed Phase III results were reported. AVI cut 35 of 125 employees, or 28% of its workforce, after losing out on a federal contract valued at as much as $500 million to produce RNA-based drugs against H1N1 pandemic flu. The layoffs came from AVI’s facilities in Corvallis, OR, as well as its headquarters in Bothell, WA. Pandemic flu is one of three infectious diseases for which AVI is developing antiviral drugs. The others are Ebola and Marburg.

A month before the December layoffs, AVI announced that the Opposition Division of the European Patent Office maintained in amended form a patent claim by Prosensa, which states that some of the intellectual property behind the DMD drug comes from its European Patent No. EP 1619249 related to the treatment of the disease by skipping dystrophin exons 51 and 46.

To read the story from Xconomy, click here.

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