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

3/23/10Follow @xconomy

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and independent experts, don’t know what might have caused the patient to develop the case of encephalititis and are looking into that question, Kirkman said today on the conference call.

The trial was designed to help Merck KGaA better understand the best dose and schedule for a combination treatment with Stimuvax, Kirkman said. The exploratory trial of multiple myeloma patients was set up to answer whether Stimuvax might be more effective if given with a new dosing schedule of Stimuvax. The idea is that cyclophosphamide, a chemotherapy drug, might be able to suppress T-regulatory cells that are known to inhibit immune reactions, Kirkman said. That way, Stimuvax, which is designed to stimulate the immune system to fight cancer cells, might become more effective with T-regulatory cells out of the way, he said.

Trials of Stimuvax to date have used a single dose of cyclophosphamide in advance to clear T-regulatory cells, Kirkman said. The exploratory trial essentially asked whether more cyclophosphamide is better. Patients in that study got the chemo drug twice in an 8-week period, and then every six weeks thereafter during the trial, Kirkman said.

This is the first time Merck KGaA or Oncothyreon have seen a case of encephalitis in years of clinical trials of Stimuvax, Kirkman said. The drug, to this point has mainly been associated with some minor swelling around injection sites, and some minor flu-like symptoms, Kirkman said. The company said it has tested “several hundred” patients over the years, following some of them as long as eight years, without ever seeing a case of a patient who got autoimmune disease after taking the drug, in which the immune system starts fighting healthy tissue. It’s unknown how long the investigation into the adverse event will take to reach a conclusion, or how much of a disruption this will cause to the ongoing clinical trials, he said.

Merck KGaA has emphasized that Stimuvax is one of its most important cancer drugs in development behind the hit it already markets in Europe, cetuximab (Erbitux). So this is a story that we’ll definitely hear more about in coming weeks or months.

“Merck KGaA is working diligently to resolve the issue,” Kirkman said, adding that Oncothyreon will notify shareholders when it knows more.

[Update: 6 pm Eastern, with analyst comments.] Analyst Simos Simeonidis of Rodman & Renshaw, a longtime Oncothyreon bull, mapped out four possible scenarios for what might happen next, in a note to clients today. Here’s a quick summary of what he outlined, before today’s conference call:

1. The doomsday scenario (10 percent probability): Merck KGaA quits developing Stimuvax, hands the program back to Oncothyreon, and Oncothyreon scraps the drug.

2. The major-blow-to-Oncothyreon scenario (20 percent probability): Merck KGaA stops developing Stimuvax, gives it back to Oncothyreon, but Oncothyreon continues developing it alone, or with another partner.

3. The delay-but-not-so-bad scenario (35 percent chance, which represents a 3 to 9-month delay): The companies determine the encephalitis case was patient-specific and/or related to the repeated use of cyclophosphamide, which does not impact the ongoing trials that used a single dose of cyclophosphamide. This enables the ongoing trials to resume, albeit with a three to nine month delay.

4. The most benign scenario (35 percent chance, representing less than a 3-month delay): The companies look at the specific patient profile and reach essentially the same conclusion as above, but fast enough so that it represents a delay of three months.

While there are a couple of optimistic scenarios there, there are still a lot of unknows. Simeonidis said he’s currently reviewing whether to change his rating on the stock. “Given the uncertainty around the Stimuvax program by the temporary suspension of the trials announced today, we are placing our rating on Oncothyreon Under Review until we have more visibility on the impact and timing for a resolution of this issue,” he said.

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