BioWorld Today Correspondent

Evotec AG is missing out on a potential $65 million payday following its decision to terminate a Phase II trial of EVT.101 in treatment-resistant depression.

The Hamburg, Germany-based firm would have earned that amount if Roche Holding AG decided to exercise a buyback option on the compound, as part of a deal worth potentially more than $300 million, which the two companies entered two years ago.

The clinical proof-of-concept trial was opened in July 2010. The aim then was to recruit around 100 patients who had not responded to at least two other antidepressants. However, the study protocol made recruitment difficult and could have led to inconclusive results, the company said.

"We had a catalog of criteria that people had to fulfill in order to qualify for the trial," Evotec CEO Werner Lanthaler told BioWorld Today. Patients were required to attend a clinical center three times before they could even qualify for recruitment. Moreover, many who were screened did not progress to treatment.

"It comes down to a situation where we said, 'OK, how long do we let it drag on?'" Lanthaler said.

He rejected any suggestion that the trial was premature, although it was ambitious, as it sought to answer multiple questions about EVT.101's potential in the indication, which encompasses around 30 percent of patients with depression. "We can either make a trial or make a drug," he said. The emphasis was placed on the second alternative.

Evotec had originally in-licensed EVT.101, and a backup compound called EVT.103, from Roche back in 2003 and took it through preclinical and early clinical development. EVT.101, an NR2B subtype selective N-methyl d-aspartate (NMDA) receptor antagonist, remains "super-interesting from a target perspective," Lanthaler said.

EVT.103 was found to be safe and well tolerated in a single and multiple dose-ascending Phase I trial, and its forerunner was well tolerated in healthy volunteers and in patients who had received treatment.

The compounds have potential in Alzheimer's disease and in neuropathic pain, and those indications remain potential avenues for partnering negotiations, as well as depression.

"None of that will happen on Evotec's own account because it's just not Evotec's core business," Lanthaler said.

Investors exited Evotec's stock in large numbers following disclosure of the news a week ago. Its shares (FRANKFURT:EVT) had fallen to €2.52 by last Monday's close, down around 15 percent on its closing price of €2.97 immediately prior to the announcement.

"This is a setback sure, but it's nothing more than a setback," Lanthaler said.

The reaction, according to one analyst at least, may be excessive. Hanns Frohnmeyer at Stuttgart, Germany-based Landesbank Baden-Württemberg trimmed his target price back by just 5 percent, from €3.70 to €3.50, based on a reduced probability of the product ever reaching the market.

He had never included the $65 million payment in his valuation.