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Eleven Bio’s Shares Routed as Dry Eye Drug Flunks Phase 3 Test

Xconomy Boston — 

Eleven Biotherapeutics has been trying to show that it’s got a prospective rival to Allergan’s blockbuster dry eye disease drug, Restasis, in the works. The results that have come back from the Cambridge, MA-based company’s first big test, however, indicate otherwise.

Eleven (NASDAQ: EBIO) said this morning that its lead drug, EBI-005, failed both primary endpoints in a Phase 3 trial in moderate to severe dry eye disease. The drug wasn’t any better than a placebo at reducing the pain and inflammation associated with the disease, and flunked all of its secondary goals in the trial as well. Based on the results, Eleven doesn’t see an “immediate” path forward for EBI-005 in dry eye disease, the company said. It won’t run its planned second Phase 3 trial for the disorder, and will instead turn its attention to its other late-stage study for EBI-005 in pink eye. That trial is expected to begin later this year.

Investors don’t appear willing wait around. Eleven’s shares were in a free-fall this morning, plummeting more than 80 percent—to $2.28 from an $11.97 per share close on Friday—in pre-market trading.

Eleven was formed by Third Rock Ventures and Flagship Ventures in 2010 with the idea of custom designing proteins from scratch to possess certain characteristics, like the ability to carry out a specific action on their specific biological target. The company was named after a reference to the infamous rock mockumentary “This is Spinal Tap,” when one of the band-members talks of an amplifier that can be cranked up to 11, rather than 10.

While the company initially aimed to use its protein drug-designing approach to amass a portfolio of candidates it could develop on its own or with partners, it morphed into an ophthalmic company after it hired biotech veteran Abbie Celniker as its CEO in 2011.

Eleven put much of its focus on EBI-005, an eye drop that is supposed to block two types of interleukin-1 receptors that are implicated in the pain and inflammation associated with dry eye disease. Eleven has proposed that the dual-action approach could separate EBI-005 from the standard of care for dry eye disease, Allergan’s Restasis. Still, Eleven’s early trials didn’t necessarily back up the theory. While EBI-005 appeared to affect the signs and symptoms of the disease in a Phase 1b/2a study in 2013, the results weren’t statistically significant. Eleven used the data to help design what it hoped was a better Phase 3 trial, but as its seen today, the results weren’t any better than before.

While Eleven says it hasn’t totally given up on dry eye—it’ll dig through the data “to fully inform our evaluation of future plans in dry eye,” Celniker said in the statement—it’s now talking up EBI-005’s other prospects. Eleven noted that pink eye is “mechanistically different” than dry eye, and that EBI-005 hit its marks in a Phase 2 study of that disease. Eleven has about $59 million in cash on hand, enough to get it through the second half of next year.

“We have sufficient capital to continue to invest in our promising pipeline and remain confident in the potential for our novel protein therapeutic drug candidates for ocular disease,” Celniker said in a statement. “Our team continues to be committed to moving forward with our upcoming plans including advancing EBI-005 into a pivotal study for allergic conjunctivitis and continuing to progress EBI-031 for diabetic macular edema.”

Third Rock and Flagship, meanwhile, have both had a big run over the past few years: both had large stakes in Agios Pharmaceuticals (NASDAQ: AGIO), for instance, which has had a meteoric rise since going public in 2013 (Flagship still held a 5.18 percent stake in Agios as of April 29). And Third Rock has had several other early successes, like Bluebird Bio (NASDAQ: BLUE), Foundation Medicine (NASDAQ: FMI), and Sage Therapeutics (NASDAQ: SAGE), which all trade far above their IPO prices. But Eleven hasn’t been among them; it priced below its projected range, at $10 per share in February 2014, and now has a lot of work to do before it can even creep back up to that point. EBI-005 is the only drug the company has in clinical testing.

According to SEC filings, Third Rock held 25 percent of Eleven as of May 7; Flagship owned 17.4 percent.

Eleven is holding a conference call this morning to discuss the results.