UPDATE 2-FDA allows Oxygen Bio to proceed with brain drug trials

Tue Mar 4, 2014 12:43pm EST

(Adds background, detail on the drug; Updates share movement)

* Oxycyte is an artificial red blood cell substitute

* Co enrolling patients in mid-stage trial outside U.S.

* Shares soar as much as 35 pct

By Natalie Grover and Esha Dey

March 4 (Reuters) - Oxygen Biotherapeutics Inc said the U.S. Food and Drug Administration had lifted an order imposed in 2008 suspending trials of its experimental brain injury drug, sending the company's shares up by more than a third in early trading.

The FDA had placed a clinical hold on the development of the drug, Oxycyte, citing concerns over its use in patients with severe traumatic brain injury (TBI).

TBI is known to cause a significant drop in platelet count as the body responds to injury and is responsible for about 52,000 deaths in the United States annually, according to the Brain Trauma Foundation.

Oxycyte is an artificial red blood cell substitute whose main function is to carry oxygen, similar to hemoglobin.

TBI is caused by a bump, blow or jolt to the head or a penetrating head injury that disrupts the normal functioning of the brain and poses a significant health risk for military service members who have greater exposure to grenades, improvised explosive devices (IEDs) and other explosives.

There have been 294,172 cases of diagnosed TBI in U.S. military service personnel since 2000, according to U.S. Department of Defense data.

Oxygen Bio, formerly know as Synthetic Blood International, received $2.07 million in funding from the U.S. Army in 2011 to conduct safety studies for the treatment.

The FDA had asked for additional data to address the concerns related to the effect of Oxycyte on the immune system and its potential to raise the risk of fatal bleeding in the brain. The company submitted the results from the two studies in September.

There are no approved drugs for TBI - a market projected to reach $2 billion by 2017 - the company said on its website, citing market research firm Global Data.

Oxygen Bio said it was currently enrolling patients outside of the United States in a mid-stage study to evaluate Oxycyte's use in patients with severe non-penetrating TBI.

The company's lead drug, levosimendan, is being tested in a late-stage trial in cardiac surgery patients at risk of low cardiac output syndrome.

Oxycyte, derived from fluorochemical-based compounds, was invented by Leland Clark, one of the company's founders, who is well known as the creator of the Clark electrode. The Clark electrode is a device used for measuring oxygen in blood, water and other liquids.

The company is also working with the U.S. Navy to evaluate Oxycyte's use in decompression sickness, hemorrhagic shock and wound treatment.

Morrisville, North Carolina-based Oxygen's shares were up 24 percent at $7.70 in early afternoon trading on the Nasdaq on Tuesday. (Editing by Kirti Pandey and Sriraj Kalluvila)