Staff Writer

Disappointing interim results from a Phase III trial of its lead cancer drug, Canvaxin, prompted CancerVax Corp. to stop development of the drug and downsize the company's work force by more than half.

Shares of CancerVax (NASDAQ:CNVX) dropped $1.26 Tuesday, or 43 percent, to close at $1.66, after the company said it was discontinuing the trial based on the recommendation of the independent data and safety monitoring board (DSMB). Upon completing the third interim analysis, the DSMB reported that Canvaxin likely would fail to meet its clinical endpoints of showing a significant survival benefit over placebo in Stage III melanoma patients. Stage III of the disease occurs when the primary tumor spreads to a patient's regional lymph nodes.

The decision came seven months after the company halted a Phase III evaluation of Canvaxin in Stage IV melanoma patients, characterized by the spread of cancer from lymph nodes to organs, also due to an apparent lack of survival benefit. That move, followed by the April 6 news that CancerVax's partner, Serono SA, was pulling out of the Stage IV Canvaxin program, caused the Carlsbad, Calif.-based company's stock to lose nearly half its value that day, closing at $3.18. (See BioWorld Today, April 7, 2005.)

"Obviously, we're very disappointed with the recommendation," said David Hale, president and CEO of CancerVax. "Based on Phase II data, we had high hopes that this would be a product that demonstrated efficacy in melanoma."

Advanced melanoma is a disease with "very few treatment alternatives," he added.

In addition to closing the Phase III trial, CancerVax also is discontinuing all further development and manufacturing operations. And "we're not planning at this time to explore any other indications for the product," Hale told BioWorld Today.

CancerVax, instead, will focus its resources on advancing other oncology products in its pipeline, including SAI-EGF, which is designed to target the epidermal growth factor receptor signaling pathway and is set to begin clinical trials in non-small-cell lung cancer patients next year. The company also has a preclinical anti-angiogenic monoclonal antibody, D93, expected to enter the clinic during the first part of 2006.

Dropping Canvaxin also upsets the worldwide collaboration CancerVax signed with Serono in December. In that deal, CancerVax received an up-front fee of $25 million in January, and Serono agreed to purchase 1 million shares of CancerVax for an additional $12 million, and to pay up to $253 million in development and regulatory milestones for Canvaxin in melanoma and other indications. The companies would co-promote the drug in the U.S., while Serono retained exclusive rights outside the U.S. in exchange for royalties to CancerVax. (See BioWorld Today, Dec. 17, 2004.)

Serono was "in agreement that we should stop development of Canvaxin," Hale said, "and the agreement provides for a wind-down period to discontinue the activities related to that development."

Those activities include closing down the 80 sites in the 1,160-patient trial across the U.S., Europe, Australia and South America.

"We'll be meeting with Serono decide how to move forward from there," Hale said.

The DSMB's recommendation was based on efficacy results only, and CancerVax reported that no safety issues were found in either Phase III study. Full results from the trials will be gathered and likely presented during a future scientific meeting.

With a significant portion of its operations having been devoted to Canvaxin, the company "decided to close our manufacturing operations in the Los Angeles area," Hale said. "So those people, and others involved in research activities related to Canvaxin, will all be laid off." Overall, CancerVax's personnel is being reduced from 183 to 80.

"That will allow us to focus our resources on our products in the pipeline," he said, "as well as to look as potentially bringing other late-stage products into the company."

At this time, CancerVax has not updated its projected financial guidance for the year. Hale said the financial impact will depend on how quickly the Phase III trial can be shut down and the closing out of Canvaxin manufacturing operations.

For the second quarter, CancerVax reported a net loss of $7.2 million. Research and development costs for the three months totaled about $10.7 million, with much of it going toward increased personnel, manufacturing and production of Canvaxin. As of June 30, the company had cash, cash equivalents and marketable securities of $66.5 million.

The Phase III Canvaxin data have much less of an impact on Serono, which has several marketed drugs, including the multiple sclerosis drug, Rebif, as well as having ex-U.S. rights to Raptiva for psoriasis. (Genentech Inc., of South San Francisco, has U.S. rights.) Geneva-based Serono said it plans to continue building its oncology pipeline, which includes HuMax-CD4, in Phase III trials for cutaneous T-cell lymphoma and in Phase II trials for non-cutaneous T-cell lymphoma. That product is being developed through a recent partnership with Copenhagen, Denmark-based Genmab A/S. (See BioWorld Today, Aug. 19, 2005.)

In Phase II development, Serono has adecatumumab for treating prostate and metastatic breast cancers and TACI-IG in multiple myeloma. The company expects study results from all those programs in 2006.

Serono's stock (NYSE:SRA) closed at $16.27 Tuesday, down 23 cents.