Oncothyreon Cancer Drug Fails in Final Trial; Shares Tank

12/19/12Follow @xconomy

Despite all the advances of modern medicine, pharmaceutical companies still sometimes take a drug all the way to the third and final phase of clinical trials before finding out it’s a failure. It’s a massive waste of time and money, and it happened today to Germany-based Merck KGaA, which was testing a cancer immunotherapy licensed from Seattle-based Oncothyreon (NASDAQ: ONTY).

Oncothyreon said today that the immune-booster L-BLP25 (Stimuvax), after more than a decade of development, failed in a pivotal trial to reach its main goal of helping patients live longer with lung cancer. The trial, known as Start, randomly assigned 1,500 patients to get a placebo or a chemo agent called cyclophosphamide followed by new immunotherapy, which was designed to stimulate the immune system to fight non-small cell lung cancer. Stimuvax had already failed once in a major clinical trial of lung cancer patients, but the thesis of the Start trial was that it showed encouraging signs in Stage III—not Stage IV—lung cancer, and that it should be tested in that population with tumors that aren’t quite so advanced.

Oncothyreon, which has no drugs on the market, saw its shares fall by more than 56 percent on the news to $1.93 at 10:05 am Eastern time.

While the news is disappointing to Merck KGaA and to patients and physicians, it’s not nearly as devastating to Oncothyreon’s business as it would have been a couple years ago. The company, when it ran into financial troubles in late 2008, handed over all the development responsibility and expense of Stimuvax to Merck KGaA, settling for an undisclosed royalty on sales if its partner developed a product. Even though most investors still identify Oncothyreon with Stimuvax because it was in a high-stakes trial in a high-profile field of cancer immunotherapy, it has long had limited strategic importance to the company.

By de-emphasizing Stimuvax in December 2008, Oncothyreon was able to move on to other priorities, raising significant money for a cancer drug that inhibits the PI3 kinase pathway—one of the hot targets in biology. It also has a wholly-owned “son of Stimuvax” in its clinical development pipeline, which it has engineered to be more effective than the original.

Neither of those programs are yet in the final stage of clinical trials, but Oncothyreon reported it had $91 million of cash and investments at the end of September, in its most recent quarterly report. Its expenses were relatively modest in that most recent quarter, with an $8.6 million net loss. The cash stockpile should sustain the company for another three years, said Simos Simeonidis, an analyst with Cowen & Company, in a note to clients today.

“Without Stimuvax, Oncothyreon now becomes a (much cleaner, more traditional, small molecule biotech) story about PX-866, the wholly-owned, oral, irreversible, inhibitor of PI3K,” Simeonidis said in the note. He adds that the PI3K inhibitor is being tested in five different mid-stage clinical trials designed to assess effectiveness in various combinations.

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