News of a failed Phase II trial for its LDL-lowering drug candidate stripped Forbes MediTech of more than half its market cap Monday. The stock (NASDAQ:FMTI) closed at $1.01, down $1.36, or 57.4 percent.

Company officials pointed out that FM-VP4 did significantly reduce LDL cholesterol levels from baseline over 12 weeks, and the effect "was dose-responsive, and it did have an effect on LDL," Forbes President and CEO Charles Butt said in a conference call.

It's just that the reduction was 9 percent, which is less than the level the FDA looks for in a prescription cholesterol-lowering drug: "We just didn't hit the 15 percent mark," Butt said.

Even 9 percent is better than the 6 percent achieved by statins when their dose is doubled from the standard prescription, and Butt said that "there is potential for FM-VP4 to provide at least the same incremental benefit but without the safety concerns associated with higher doses of statins." He acknowledge, though, that the days of hoping for a FM-VP4 blockbuster were over.

Forbes will review the data further as they become available in the next few weeks and will continue to seek an out-licensing opportunity in both North America and beyond.

What the company called FM-VP4's "excellent" safety profile may yet prove to be a draw for potential partners. Statins are the first - and last - pharmaceutical line of defense against high levels of LDL, and work by inhibiting the synthesis of cholesterol in the liver. In contrast, FM-VP4, which is a derivative of a plant fatty acid or phytosterol, works by preventing cholesterol from being taken up from the gut by blood cells.

Butt said Monday that the company still has "a pipeline of new development candidates." Forbes recently acquired the Sequenom spinout TheraPei Pharmaceuticals Inc., of San Diego, in part to bring new technologies into the company. (See BioWorld Today, Oct. 26, 2006.)

In fact, Vancouver, British Columbia-based Forbes works on nutraceuticals as well as pharmaceuticals, and has an approved nutraceutical on the market in Europe. In March 2005, the company received regulatory approval to market its Reducol, a phytosterol-derived cholesterol-lowering compound, in seven major food groups. In its report for the third quarter, the company reported revenues of slightly more than $1.1 million from the direct sales of phytosterol products.

Reducol also is approved in the U.S. under the "generally recognized as safe" rule. Butt said that the company is "working with U.S. food manufacturers at different levels," but said that Reducol has had a warmer reception in Europe, both because Europeans are more receptive to the fact that Reducol contains no genetically modified organisms and because "in the U.S. in general, functional foods are not as developed as in Europe."

But investors placed a fair amount of value on the pharmaceutical side of Forbes, and the failed Phase II trial was perceived as a significant setback in that area.