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Intercell Plunges on Phase III Miss; Restructuring to Come

BioWorld International Correspondent

Shares in Intercell AG plummeted 40 percent Monday on news that its patch-based vaccine for traveler's diarrhea failed to demonstrate efficacy in two studies, a Phase III trial in Central America and a Phase II pilot study in India.

Intercell, of Vienna, Austria, is discontinuing development of the vaccine and will take a write-down on the book value of the program. "The value of the asset is about €170 million (US$227.6 million)," Intercell chief financial officer Reinhard Kandera told BioWorld International.

The company also will miss out on an anticipated €20 million milestone payment this year from its partner, London-based GlaxoSmithKline plc. The program, which is part of a wider alliance on the patch technology, was worth up to €60 million in total milestone payments.

Intercell plans to cut its R&D spending by about 40 percent next year, and it also will reduce headcount, although the company has not disclosed specific plans as yet.

The vaccine, intended to protect against enterotoxigenic Escherichia coli (ETEC) strains, had been administered to 2,063 Europeans traveling to Mexico or Guatemala, and to 723 Europeans traveling to India. It failed to meet its primary endpoint – reduction in incidence of ETEC infection – in either trial, however.

The two trials yielded similar outcomes. "A trend toward protection against LT-positive ETEC was observed, but no protective effect against other subtypes was observed," Kandera said.

LT-positive ETEC strains produce a heat-labile toxin, which shares a high level of homology with the cholera toxin. The vaccine itself comprises the LT protein, which, although considered immunogenic, cannot be safely administered via oral, nasal or parenteral routes. The rationale for delivering the antigen via a skin patch was that uptake of the antigen by dendritic cells in the skin would result in a robust immune response.

In the Central American trial, known as the ELT301 study, the vaccine reduced all forms of ETEC infection by 35 percent vs. placebo, which was not a statistically significant result. It did lead to a 60 percent reduction in LT-positive ETEC infections, but the study was not powered to demonstrate efficacy for individual ETEC subtypes. Moreover, the prevalence of LT-positive strains – at less than 10 percent – was lower than expected, Kandera said. It was even lower in the Indian study, known as ELT209.

The vaccine also failed to meet its secondary endpoint of protection against all causes of diarrhea. Nevertheless, Intercell said the two trials were conducted properly and met their targets on enrollment, follow-up and subject and site compliance. Moreover, its safety profile was consistent with what was seen in previous studies.

However, its efficacy profile was not. In a previous Phase II trial, reported in the June 14, 2008, issue of The Lancet, the vaccine attained a protective efficacy rate of 75 percent. Kandera attributed the discrepancy to the differing trial sizes. The successful study recruited just 201 volunteers, of whom 178 received the vaccine and and traveled.

The latest failure is the second involving the patch technology that Intercell reported this year. An adjuvant based on the patch technology also failed to demonstrate efficacy in a Phase II trial of a pandemic influenza vaccine in July.

Intercell acquired the platform through its 2008 purchase of Iomai Corp., of Gaithersburg, Md., for $189 million in cash and shares. Its alliance with GSK involves up to 11 indications, but all other programs are at a much earlier stage of development.

Despite the miss, the two trials did offer the largest technical proof of principle of the technology to date.

"We could show that we effectively delivered a vaccine to the immune system, that we generated an immune response and that there is a protective effect," Kandera said. The problem lies with the choice of antigen rather than the delivery technology, he said.

Shares in Intercell (AUSTRIA:ICLL) closed Monday at €10, down €6.86, and the stock is now at its lowest level in more than four years.

But that market reaction was exaggerated, according to a research note from Peter Welford and colleagues at Jefferies International Ltd., in London.

Before Monday's news, Jefferies had valued the company at €30 per share and the travelers' diarrhea vaccine at €5 per share. The company remains "fundamentally undervalued," according to Jefferies.

Key value drivers in the first half of 2011 will be a decision by Novartis AG, of Basel, Switzerland, to opt in on Intercell's IC43 Pseudomonas aeruginosa vaccine and data from a Phase II/III trial of V710, a vaccine against methicillin-resistant Staphylococcus aureus infections, which is licensed to Merck & Co. Inc., of Whitehouse Station, N.J.

Published: December 15, 2010