UPDATE 4-Isis says cholesterol drug works; but safety weighs

* Cholesterol drug cuts "bad" LDL cholesterol 28 pct

* Investors remain concerned about liver toxicity

* Genzyme expects to file for approval in first half 2011

* Isis falls as much as 20 pct; Genzyme down 0.7 pct (Adds analyst comment, closing share prices)

By Toni Clarke and Ransdell Pierson

BOSTON/NEW YORK, Feb 10 (Reuters) - Isis Pharmaceuticals Inc (ISIS.O) said on Wednesday its cholesterol-lowering drug mipomersen was effective in a late-stage clinical trial, but safety concerns pushed the company's shares down as much as 20 percent.

Mipomersen, which Isis is developing with partner Genzyme Corp GENZ.O, is designed to lower "bad" LDL cholesterol in patients with severe, inherited high cholesterol, known as familial hypercholesterolemia.

The trial tested 124 patients with pre-existing coronary artery disease who were taking the maximum tolerated dose of a statin such as Lipitor. Those taking mipomersen experienced an average reduction in LDL cholesterol of 28 percent after 26 weeks of treatment.

That compared with an average reduction of 5 percent for patients treated with a placebo.

The results mirror those of a previous trial -- and though the drug proved effective, some patients developed elevated liver enzymes, a possible sign of liver damage.

Isis said there was nothing in other laboratory tests to indicate that the patients had any liver dysfunction, but analysts are concerned that the marker itself, even without liver damage, would lead to restricted sales.

Of the 83 patients treated with mipomersen, 73 completed the study. Nine dropped out due to side effects.

"While full data is being withheld for a scientific meeting, we expect a portion of these drop-outs were due to elevated liver enzymes," said Christopher Raymond, an analyst at Robert W. Baird, in a research note.

Elevated liver enzymes have blocked approval of several experimental drugs, including Exanta, a blood-clot preventing drug developed by AstraZeneca Plc (AZN.L).

"We continue to believe the safety profile of mipomersen may not be acceptable outside of the highest-risk populations" because of the liver enzymes, said Brian Abrahams, an analyst at Oppenheimer & Co.

But Barclays Capital analyst Jim Birchenough reiterated his "overweight" rating on Isis, saying efficacy in the latest study was better than the earlier Phase III study and that liver enzyme elevations were "in line with commonly used statins."

Patients with familial hypercholesterolemia are unable to properly metabolize LDL due to dysfunctional LDL receptors, which are responsible for clearing LDL from plasma.

There are two forms of the disease: homozygous, or hoFH, in which a defective gene is inherited from both parents, and heterozygous, or heFH, in which a defective gene is inherited from only one parent so that some LDL receptor function is preserved.

HoFH is estimated to affect about one in a million people worldwide. HeFH is a more common form of the disorder, affecting about one in 500 people.

The latest trial tested patients with heFH, who had average LDL levels of 150 at the beginning of the study, placing them at high risk of developing heart disease. At the end of the study, 45 percent of mipomersen-treated patients achieved LDL levels of less than 100, a recognized treatment goal.

"The nearly 50 mg/dL additional decrease in LDL-C when added to maximally tolerated statin therapy is above what we have seen with any other agent in this population, and the side effect profile of mipomersen continues to be acceptable," said Dr. Evan Stein, director of the Metabolic & Atherosclerosis Research Center in Cincinnati and an investigator on the trial.

Genzyme, which is handling the regulatory filings for the drug, will first seek approval for patients with hoFH. A late-stage study of the drug in that population met its main goal of a 25 percent average reduction in LDL cholesterol. Genzyme expects to file for U.S. and European approval for the drug in the first half of 2011.

Mipomersen, which is given weekly by injection, is based on a technology known as antisense, which aims to interfere at the genetic level to prevent rogue proteins from being formed. The drug is designed to reduce LDL cholesterol by preventing the formation of fatty materials that build up in artery walls.

Isis, which is based in Carlsbad, Calif., closed down $2.06, or 18.7 percent, to $8.98 on Nasdaq. Earlier in the day they fell to a 12-month low of $8.85. Shares of Cambridge, Massachusetts-based Genzyme fell 0.67 percent to $54.50. (Additional reporting by Debra Sherman, editing by Gerald E. McCormick, Maureen Bavdek and Carol Bishopric)