Shares of Ophthalix Inc. (OTCQB:OPLI) swooned Monday after the company disclosed that CF101, an A3 adenosine receptor (A3AR) agonist licensed from parent company Can-Fite Biopharma Ltd., failed to meet primary and secondary efficacy endpoints in a Phase III study in moderate-to-severe dry eye syndrome (DES).

The stock dropped $4.25, or 77.3 percent, to close at $1.25.

Shares of Can-Fite (NYSE:CANF) also suffered, falling $2.66, or 32.4 percent, to close at $5.54. Just last week, the stock hit a 52-week high of $9.46 following disclosure of stellar top-line results from a Phase IIb study of CF101 as monotherapy for rheumatoid arthritis. (See BioWorld Today, Dec. 24, 2013.)

The 24-week, placebo-controlled Phase III DES study enrolled 237 patients, randomized to two oral doses of CF101 (0.1 mg or 1 mg) or placebo for 24 weeks. The primary efficacy endpoint was complete clearing of corneal staining. Secondary efficacy endpoints, according to Cortellis Clinical Trials Intelligence, included increase in Schirmer test tearing by > 9 mm over baseline, complete central corneal clearing by fluorescein staining and change from baseline in ocular surface disease index – all measured at 24 weeks.

CF101 achieved its primary safety measure, demonstrating good tolerability.

The DES study – indeed, the emergence of Ophthalix as a Can-Fite subsidiary – resulted from a serendipitous finding in an RA study of CF101 during which patients told investigators they no longer needed to use eye drops. In December 2011, Can-Fite, of Petach Tikvah, Israel, changed the name of its subsidiary Denali Concrete Management Inc. to Ophthalix, also of Petach Tikvah, after acquiring 82 percent of the firm’s U.S. stock market shell.

Can-Fite saw the potential to develop an oral ophthalmic drug as a unique opportunity in an indication in which the only approved drug is Irvine, Calif.-based Allergan Inc.’s Restasis (0.05 percent cyclosporine solution) – cleared for marketing in the U.S. and elsewhere. (See BioWorld Today, March 19, 2013.)

However, numerous DES candidates are advancing through advanced trials. They include 5 percent lifitegrast ophthalmic solution developed by Sarcode Bioscience Inc. (acquired in March by Shire plc), 2 percent rebamipide ophthalmic suspension from Seattle-based Acucela Inc., RGN-259 (T-beta4 preservative-free eye drops) from Regenerx Biopharmaceuticals Inc., of Rockville, Md., ophthalmic protein product EBI-005 from Cambridge, Mass.-based Eleven Biotherapeutics Inc. and MIM-D3, a small-molecule mimetic of nerve growth factor that binds to the TrkA receptor, from Mimetogen Pharmaceuticals Inc., of Montreal. (See BioWorld Today, Jan. 19, 2011, and June 27, 2013, and BioWorld Insight, July 14, 2013.)

Ophthalix also is developing CF101 to treat glaucoma and uveitis, with interim data from an ongoing Phase II study in glaucoma expected to report in 2014 and a Phase II in uveitis set to begin in the first quarter of the year.

Although her disappointment was palpable, Pnina Fishman, chairman of Ophthalix and CEO of Can-Fite, suggested it was too early to write off CF101 in eye disease. She said Ophthalix is analyzing the data and hinted the drug may have disproportionately benefited patients with higher A3AR receptor expression levels.

“Many things can affect the data, such as heterogeneity of the population,” Fishman told BioWorld Today, noting that patients recovering from surgery tend to respond differently than those with DES due to chronic conditions such as RA. “We need to see which segment of the patient population responded to the drug.”

Ophthalix is drilling into the dosage level and evaluating secondary endpoint data. Detailed findings could support a more carefully constructed registration study, which the company said all along would be needed for a filing in DES. Depending on the company’s conclusions about the DES Phase III data, Ophthalix also could seek to amend the protocols for the glaucoma and uveitis studies, according to Fishman.

She said an update on the DES program could come within days.

In the meantime, safety data for CF101 were consistent with previous findings, providing both companies with additional confidence to discuss the next steps for the drug with regulators.

Roth Capital Partners analyst Joseph Pantginis seemed unperturbed by the DES data, reiterating his “Buy” rating and 12-month price target of $28 for Can-Fite. He wrote in a company note that the company’s focus “should remain on last week’s positive randomized Phase II data in RA [and] increased partnering potential.”

Pantginis added that Can-Fite signed confidentiality agreements with multiple pharma companies for a potential CF101 partnership, suggesting that “autoimmune indications such as RA and psoriasis will drive the signing of term sheet(s) and not ophthalmological indications.”

A week earlier, Pantginis called the CF101 findings in RA a “major shot across the biologics’ bow,” upping Can-Fite’s previous price target of $15.

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