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Karo Bio Stock Plunges, Safety Issues Scuttle Eprotirome Trial

By Cormac Sheridan
Staff Writer

Shares in Karo Bio AB plunged more than 66 percent Tuesday on news that the company was terminating a Phase III pivotal trial of its lead drug eprotirome, after a toxicology study in dogs indicated that long-term exposure could result in cartilage damage.

Indications that there were problems afoot had come a day earlier. Trading in Karo Bio's shares was suspended on the OMX Nasdaq exchange in Stockholm, Sweden, on Monday, following a large-scale exit from the stock that began last week.

The Huddinge, Sweden-based company also shelved plans to spin out its preclinical operations into a separate entity that was to be put up for sale. Its preclinical activities will now become the company's main focus of activity. "The company that we wanted to spin off is actually what we have left," CEO Per Bengtsson told BioWorld International.

Karo Bio said it would take wind-up charges of SEK55 million (US$8.3 million) during the current quarter to terminate the program. That will knock a large dent in the company's cash reserves. It reported SEK158.5 million in cash at the end of 2011.

That the effects of long-term exposure to eprotirome should only come to light now is surprising. The drug, a thyroid hormone agonist formerly called KB2115, entered its first human study as far back as 2005. "This is pretty peculiar because we didn't see anything in the six-month tox," Bengtsson said. "It's a very, very slowly developing thing."

An earlier study, with much higher doses, had raised some questions, but following consultations with outside experts, those were interpreted as problems arising from the design of the study – young animals instead of adult animals were used – rather than the action of the drug. In the present study, visual inspection as late as eight months and 10 months did not indicate that eprotirome was causing a problem.

"We didn't see any inflammation. It didn't seem to be destruction by the drug – rather that it prevented something [from happening]," Bengtsson said.

Eprotirome had been in development as a cholesterol-lowering agent in patients with heterozygous familial hypercholesterolemia (HeFH), a hereditary condition characterized by high levels of plasma cholesterol and a high risk of coronary heart disease. The company began recruitment in a 630-patient Phase III study in October 2011.

Thyroid hormone lowers low-density lipoprotein (LDL) cholesterol, by increasing expression of the LDL-receptor gene in the liver, but it cannot be used in dyslipidemia indications because of its side effects on the heart and other tissues. Eprotirome was developed to circumvent those problems. It was selective for the beta form of the thyroid hormone receptor, which is expressed in liver tissue, over the alpha form, which is expressed in the heart.

Karo Bio is still funded for more than 12 months. It expects to receive $10 million to $14 million over the next two years from a deal it entered late last year with New York-based Pfizer Inc. on finding modulators of retinoic acid-related orphan receptor (ROR-gamma) for autoimmune disease. "The $10 million is guaranteed, and the $4 million is milestones," Bengtsson said. (See BioWorld International, Jan. 4, 2012.)

Its other main preclinical pipeline projects include efforts in finding highly selective modulators of estrogen receptor beta, which have potential application in multiple therapeutic areas, and modulators of glucocorticoid receptor, which have potential in inflammation.

The present news is a bitter setback for a company that has long been a leader in nuclear receptor biology and medicinal chemistry. Karo Bio is marking its 25th year in existence this year, but it is now doing so as an early stage drug discovery company.

Shares fell as low as SEK0.33 during trading Tuesday, having reached SEK1.20 before the trading suspension was imposed. The stock (STOCKHOLM:KARO) closed Tuesday at SEK0.38.