Oncothyreon Stock Plummets as Side Effect Emerges in Cancer Patient, Trials Halted

3/23/10Follow @xconomy

[Updated: 6 pm Eastern] Bad news out of Seattle-based Oncothyreon (NASDAQ: ONTY) today. The company’s partner, the Merck Serono unit of Germany-based Merck KGaA, has halted clinical trials of an immune-boosting treatment for cancer after it saw an unexpected inflammation of the brain in a patient who joined an exploratory trial. Shares of Oncothyreon fell 29 percent on the news.

The FDA has placed the development program for the BLP25 liposomal vaccine (Stimuvax) on a clinical hold, which means all clinical trials of the experimental drug are on hold until researchers can determine whether it’s safe to start them up again. The suspension affects two lung cancer trials known as Start and Inspire, as well as a breast cancer study called Stride. Those are large, pivotal trials that enroll a combined 2,600 patients.

The patient in question developed encephalitis, or inflammation of the brain, in an exploratory trial of Oncothyreon’s vaccine, the company said. The study was investigating the vaccine’s mechanism of action and how it works in combination with cyclophosmide chemotherapy. The patient has multiple myeloma, a cancer of the bone marrow.

“Patient safety is of paramount importance to Merck Serono and to Oncothyreon,” said Oncothyreon CEO Bob Kirkman, in a statement. “We understand that Merck Serono is working closely with the FDA, other regulatory agencies and the patient’s physicians to evaluate the implications of this adverse reaction and to determine an appropriate course of action.”

The clinical hold is big setback for Oncothyreon, which has been on a roll the past year because of renewed enthusiasm for Stimuvax. The company renegotiated a partnership in December 2008 to shift all the development costs to Merck KGaA, while retaining a double-digit percentage royalty on sales if it becomes a marketed product. Then the big partner showed confidence in the program by starting a new 900-patient breast cancer study last June, followed by a 420-patient trial in December. Oncothyreon has also benefitted from renewed interest in treatments that stimulate the immune system to fight cancer, following the success of Seattle-based Dendreon’s treatment for prostate cancer.

While most investors are putting value on Oncothyreon for its stake in Stimuvax, it has other programs as well. The company has two cancer drugs in development, including one that is poised for mid-stage clinical trials this year, and a next-generation cancer vaccine in the works, which I discussed with Kirkman in a December interview.

Shares of Oncothyreon fell 27 percent to $3.49 at the close of trading today. Because so much of the company’s value is tied up in Stimuvax, there are going to be a lot of questions about this serious adverse event.

As is often the case with a report of a serious adverse event in a clinical trial, Oncothyreon’s conference call today raised more questions than it answered. Merck KGaA, along with the FDA … Next Page »

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