Staff Writer

Serono SA had a double dose of news Wednesday, stopping two of its Phase III programs: onercept for psoriasis, and newly partnered product Canvaxin for Stage IV melanoma.

But it was Canvaxin's developer, CancerVax Corp., which suffered a 49.4 percent stock plunge. Shares (NASDAQ:CNVX) fell $3.10 to close at $3.18, while Serono's stock (NYSE:SRA) dropped 14 cents, to close at $17.90.

Geneva-based Serono discontinued onercept in moderate to severe psoriasis due to safety concerns, and quit Canvaxin in Stage IV melanoma due to lack of a survival benefit, both moves done on the recommendations of two separate independent Data and Safety Monitoring Boards (DSMB).

While the companies have decided to move forward on a Phase III Canvaxin trial in Stage III melanoma patients, based on the DSMB recommendation, the product's reputation might be tainted for investors.

"Stage III patients are a little bit easier to treat. The disease hasn't progressed as far, so there's some potential there, in that the patients may be better able to handle the treatment," said analyst Darshana Punithkumar, of New York-based Mehta Partners LLC, who covers Serono. "But still, this doesn't bode well for the product, so we're still very cautious on it."

Punithkumar said neither onercept nor Canvaxin have figured into many analysts' models for Serono because launch was considered far off. Analysts and investors have mostly focused on Serono's Raptiva, recently launched for psoriasis in Europe, as well as its multiple sclerosis product Rebif, which is growing well in the U.S. market, thanks to the withdrawal of Tysabri (Elan Corp. plc and Biogen Idec Inc.).

But smaller Carlsbad, Calif.-based CancerVax doesn't have a Rebif to fall back on.

"Obviously, this news is disappointing," said CancerVax's president and CEO, David Hale. "Treatment of patients with Stage IV melanoma has proven to be very difficult, and no therapeutic agent has been shown to impact overall survival in these patients."

The DSMB conducted its second interim analysis of the data and discovered Canvaxin would not be able to show a survival benefit over placebo in Stage IV patients. The trial had enrolled a total of 496 patients out of a planned 670 before discontinuing.

The Stage III melanoma trial completed enrollment of 1,160 patients last year, and the DSMB is expected to conduct a third interim analysis in the third quarter. Final analysis, once 392 deaths have occurred, is expected in the middle of 2006. A launch of the product in the U.S. and Europe could occur in 2007.

"It's important to note that there are a number of oncology drugs that have been approved based on a single clinical trial," said Hale, who listed Tarceva, Velcade and Avastin as examples.

Although Canvaxin did poorly in Stage IV patients, Hale said it still has potential in Stage III patients when considering the differences between the two stages. Stage III, for instance, occurs when a primary tumor spreads to regional lymph nodes, and the five-year survival rate is between 27 percent and 70 percent. Stage IV is when the cancer has spread to organs beyond the regional lymph nodes, commonly the lungs, brain, liver and intestines. The five-year survival rate is only 7 percent to 19 percent.

"Patients with Stage IV melanoma progress much faster," Hale said, "and therefore, there is less opportunity for an immunotherapeutic agent to affect the progress of the disease."

CancerVax and Serono partnered to develop and market Canvaxin last December in a deal worth up to $290 million for CancerVax, including $253 million in milestones. (See BioWorld Today, Dec. 17, 2004.)

Neither company would give specifics about how that agreement might be affected now that Stage IV melanoma has fallen out of the picture.

"There were milestones associated with the approval for Canvaxin in Stage IV melanoma," Hale said, "and so obviously, we would not be receiving those milestones as a result of discontinuance of this study."

Both companies stressed that Canvaxin has had no safety issues in either of its Phase III trials, unlike Serono's onercept. Since the Phase III psoriasis trial was started in 2004, two patients have been diagnosed with sepsis, and one of them died.

While sepsis is a potential risk for patients treated with anti-tumor necrosis factor therapies, onercept failed to provide the efficacy response needed to justify that risk.

"In the interest of patient safety, we believe this is the best course of action," said Franck Latrille, Serono's senior executive vice president of corporate global product development.

The DSMB looked at the blinded efficacy data at 12 weeks for the two placebo-controlled pivotal trials, as well as data from the open-label trial. The response rate was less than what was observed in the earlier Phase II trial, and less than other available treatments.

Serono is evaluating whether to go forward with a planned Phase II trial of onercept in endometriosis. Either way, it expects to replace the product by in-licensing more promising dermatology candidates.

Punithkumar said a launch of onercept wasn't expected until the 2007-2008 time frame.

"For us, this represented a nice opportunity because the psoriasis market is very fast growing," Punithkumar said. "However, we were cautious on this because it is a more difficult-to-treat population."