BioWorld International Correspondent

Forest Laboratories Inc. ended its involvement in the development of Paion AG's clot-busting stroke drug desmoteplase, prior to the completion of a detailed analysis of a recently completed Phase III clinical trial, which missed its primary endpoint.

New York-based Forest has returned North American rights to the compound, which it had gained through an agreement it signed with Aachen, Germany-based Paion in 2004.

Copenhagen, Denmark-based H. Lundbeck A/S, Paion's European development partner, has yet to signal its intentions, and still is engaged in an analysis of the data.

The Forest move will have no bearing on its decision, Paion spokesman, Nils Peer Schroeder, told BioWorld International, since deciding to terminate or continue involvement in a program depends on multiple factors. "It's a very complex thing, and the answer might be different for different companies," he said.

The move has led to a one-time gain of €4.3 million (US$5.9 million) for Paion, as it can derecognize a provision it had made for paying back development expenses it had received in advance from Forest. The company also had received milestones worth €18 million from Forest. It would have gained a combined €80 million in total from its two partners if Desmoteplase had gained approval.

The compound, a recombinant version of a protein isolated from the saliva of the vampire bat Desmodus rotundus, is intended to widen the stroke treatment window from three to nine hours and therefore extend thrombolytic therapy to a wider patient population.

Right now, though, its future is uncertain due to an unexpectedly high placebo response seen in a recent 186-patient Phase III clinical trial, DIAS-2 (Desmoteplase in Acute Ischemic Stroke), which masked any efficacy signal that may have been evident.

Paion and Lundbeck are engaged in a study of the data, including subgroup analyses, to determine whether there is a scientific and an economic rationale for continuing the development program.

The partners have not communicated when they expect to conclude the work, but it's likely to be finished before year-end, Schroeder said. "It's in the interest of every company to come to a conclusion as soon as possible - on the basis of valid data."

However, the market already has come to its own conclusion - for now. "I would say that most market participants are already assuming that this program may not survive," Christian Orquera, senior analyst at First Berlin Equity Research GmbH, in Berlin, told BioWorld International.

Paion currently is valued well below the €49.1 million cash balance it reported on June 30. Its share price of €1.79 during trading on Thursday afternoon, shortly after reporting the Forest move, values the company at around €30 million.

Orquera's most recent target price was €2.60, but he currently has a hold recommendation on the stock. "Even without Desmoteplase, we believe there is significant value in Paion, such as its scientific and development expertise and earlier-stage pipeline portfolio. However, we expect market sentiment to remain low as we see little chance of positive catalysts to support the share price in the near term," he wrote in a recent research report.