Omeros Corp. went down hard following news that the Seattle-based company's lead candidate OMS103HP did not meet endpoints in Phase III trials evaluating its ability to improve postoperative joint motion and function and reduce postoperative pain in patients who'd undergone arthroscopic anterior cruciate ligament (ACL) reconstruction surgery.
Omeros stock (NASDAQ:OMER) lost $2.94, or 36.8 percent, to close at $5.06 on Friday.
CEO Greg Demopulos called the results inconclusive, said that an examination of data had not been completed, and explained during a conference call that variability in the way physical therapists evaluated patients was "confounding." He said the ACL study would not halt the company's planned Phase III OMS103HP program for meniscectomy surgery.
OMS103HP is a combination of ketoprofen, amitriptyline and oxymetazoline, ingredients that the company said were selected for their anti-inflammatory action and which interact with discrete molecular targets involved in acute inflammation.
It is injected into arthroscopic irrigation solutions and perfused through the joint in low concentrations during surgery.
Enrollment for the Phase III ACL study started in 2004 and was completed in 2010. The trial involved more than 1,000 patients in three multicenter, vehicle-controlled trials. Two of the trials, with 280 patients each, evaluated efficacy and safety, while the third with 480 patients evaluated safety, the company said.
The key endpoints were knee function, range of motion, pain and the length of time before a patient could return to work.
Rodman & Renshaw analyst Elemer Piros suggested that Omeros has some rehab to do before it will be back at full strength with investors. Piros' firm lowered Omeros' rating a notch.
"OMS103HP exhibited a reliable signal in a Phase II meniscectomy trial, [but] its effectiveness would have to be reconfirmed in Phase III trials," Piros wrote. "Based on the ACL Phase III failure, the true value of OMS103HP will likely not be realized until the results from one of the pivotal studies in the meniscectomy surgery indication are shown to be statistically significant."
Piros noted that with time the company's pipeline of advanced-stage compounds will progress into pivotal clinical trials and drive shareholder value, but added, "Until then, we believe that Omeros shares may trade range bound."
Demopulos said he was "clearly disappointed and surprised" by the results. "We don't have a good answer as to whether there was or was not a drug effect," he said. "We don't know how to correctly interpret the data."
Demopulos explained that much of the Phase III ACL efficacy data was collected by physical therapists who served as evaluators and assessed postoperative functional outcomes. Because there were a large number of evaluators there was also the potential for variability in how they assessed outcomes.
Demopulos said the company understood that risk going in and tried to standardize data collection without complete success. In addition, he said, drug- and vehicle-treated patients were not distributed evenly to evaluators, which also confounded the studies.
"The studies failed. We missed," he said. "Despite the training, the mitigating efforts, the variability occurred." Demopulos said it was uncertain whether the company would continue the ACL program.
He emphasized that the results did not appear to undermine the Phase III-ready OMS103HP program for meniscectomy surgery, noting that "we don't believe there is a bleed to our meniscectomy studies."
In previous trials, OMS103HP demonstrated a clear drug effect in ACL reconstruction and meniscectomy. The company said that an earlier double-blind, vehicle-controlled, randomized Phase I-II study conducted at Stanford University in ACL patients demonstrated statistically significant improvement in postoperative knee range of motion and function, better pain management and earlier return to work.
A Phase II trial in meniscectomy surgery patients completed in 2010 demonstrated statistically significant clinical benefits across similar endpoints, the company said.
A week earlier, Omeros reported that ophthalmology candidate OMS302 showed statistically significant maintenance of mydriasis (pupil-dilation) during a cataract surgical procedure in a Phase IIb trial. Maintenance of mydriasis prevents injury to eye structures and prolongs operating time.
OMS302 also decreased pain after surgery and was safe and well tolerated. Omeros has begun preparing for a Phase III trial.
Demopulos said that the company ended 2010 with about $42 million in cash, enough to comfortably get the company through 12 months.