Washington Editor

Shares of Montreal-based MethylGene Inc. plummeted 45 percent Wednesday on the news that the firm was suspending enrollment of new patients in clinical trials of its experimental cancer compound MGCD0103.

The voluntary suspension was based on reports of pericarditis, an inflammation of the fibrous sac surrounding the heart, and pericardial effusion, fluid around the heart, in 19 of about 400 study participants.

Shares also tumbled 51.6 percent for Progen Pharmaceuticals Ltd. after the Brisbane, Australia-based firm said it was discontinuing a Phase III trial of its liver cancer drug PI-88, citing slower-than-expected enrollment, initiation and regulatory processes in China, Korea and Vietnam.

Shares of MethylGene (TSX:MYG) closed Wednesday at C99 (US98 cents) on the Toronto Stock Exchange, down C82 cents, while shares of Progen (ASX:PGL) closed at A58 cents on the Australian Securities Exchange, down A62 cents.

Analyst Joseph Pantginis, of Canaccord Adams, said he expected MethylGene's stock, which was already under pressure, to "likely be placed in the penalty box until this issue is resolved," which he said he believed it would be.

MethylGene CEO Donald Corcoran said his firm's decision was a voluntary precaution recommended by the study's standing internal safety committee, and was not prompted by any regulatory body.

During a conference call to investors and analysts, Corcoran noted there has been no determination that the potential pericardial signal is drug-related, and added that study participants are those with complex, late-stage disease, many of whom previously have received numerous other therapies.

He said investigators had deemed about half of the reported adverse pericardial events as unlikely to be drug-related. "Most of the cases had potentially confounding factors independent of MGCD0103, which may have caused or contributed to these events," Corcoran said, adding that some of those factors included prior chest irradiation, significant disease in the chest, rapidly progressive disease or pneumonia.

The suspension only affects new patient enrollment in MGCD0103 clinical trials, he told investors and analysts, noting that the adverse pericardial events tended to occur during the first cycle of therapy, which Corcoran said was 21 to 28 days of treatment.

Patients currently enrolled will continue on treatment, he said.

MethylGene is developing MGCD0103, an isoform-selective histone deacetylase inhibitor, under a partnership with Summit, N.J.-based Celgene Corp.

The drug currently is being evaluated in several Phase I and II studies as a treatment for aggressive non-Hodgkin's lymphoma, refractory or relapsed Hodgkin's lymphoma, acute myelogenous leukemia (AML), high-risk myelodysplastic syndromes, chronic lymphocytic leukemia and B-cell lymphomas.

MGCD0103 has received orphan drug designation from the FDA and has been designated an orphan medicinal product by the European Medicines Agency for the treatment of Hodgkin lymphoma and AML.

Canaccord Adams' Pantginis said he thinks MethylGene's partner, Celgene, is taking an "ultra-conservative stance" about the safety of MGCD0103, given the history of the New Jersey firm's drug thalidomide.

Pericardial effusions, he noted, can be caused by a variety of local and systemic disorders or it may be idiopathic.

"Pericardial effusions can be acute or chronic, and the time course of development has a great impact on the patient's symptoms," Pantginis said in a research note.

He noted that the condition is the primary or contributory cause of death in 86 percent of cancer patients with symptomatic effusions.

In addition, Pantginis said, there was no indication of pericarditis in any of the animal studies of MGCD0103.

"The safety of patients is of primary importance to both MethylGene and Celgene, and as such, we have taken this precautionary measure," Corcoran declared.

He said the companies are "working diligently together" to put in place an action plan and a series of steps to identify and manage the potential condition "to provide safe access of MGCD0103 to new patients and allow them to receive the potential clinical benefits of this promising therapy as soon as possible."

He said the firms had notified drug regulators and will provide them with the action plan once it is complete.

Slow Path

Progen said sluggish recruitment and the dawdling regulatory processes in China, Korea and Vietnam were part of the problems that led to the downfall of its Phase III trial, known as PATHWAY, of its investigational liver anticancer agent PI-88.

Progen noted that only five sites out of the 23 planned had come on board and had recruited only 12 patients for PATHWAY.

The Australian firm also has been unable to attract a global partner on the liver cancer drug. Without such a partner, Progen said it will be less able to expand into additional indications and exploit all potential PI-88 commercial opportunities.

The company said it now will gauge regional-level interest of the drug. Progen said that existing patients receiving PI-88 will continue to get the drug, subject to regulatory approval. The company said costs of the trial in 2008 were estimated at $9.8 million, while the cost to discontinue the study is less than $4 million.

Progen said it will complete a Phase IIb trial of PI-88 in melanoma, but plans no further development of the drug in that indication.

In addition, the firm said it also plans to terminate further development of PI-166 in liver cancer based on a recent commercial assessment of the market and the November 2007 approval of Nexavar (sorafenib), a multikinase inhibitor sold by Emeryville, Calif.-based Onyx Pharmaceuticals Inc. and partner Bayer Pharmaceuticals Corp., of Wayne, N.J.

Progen said it plans to focus its resources on aggressively pursuing its other compounds in development, namely PG11047, which is in Phase I testing in various advanced cancers, its 500 series, currently in late preclinical development, and its early preclinical epigenetics platform.

Progen also said it is actively pursuing merger and acquisition opportunities to expand its clinical stage pipeline.