Washington Editor

Shares in Inhibitex Inc. plunged by two-thirds Monday after the company released poor Phase III data on Veronate.

The antibody-based investigational drug failed to meet its primary endpoint in a trial for the prevention of hospital-associated infections due to Staphylococcus aureus in premature infants weighing between 500 and 1,250 grams at birth, and there were no measurable effects or trends in favor of Veronate for any of the secondary endpoints, either. The trial enrolled 2,017 infants at 95 neonatal intensive care units across the U.S. and Canada, where they were followed for up to 70 days, or until hospital discharge.

"The outcome of this trial was unexpected," Inhibitex President and CEO William Johnston said during a conference call.

Notably, the drug produced no positive trends among different subgroups of babies treated in the trial, including those between 500 grams and 900 grams who are at higher risk of developing infections. The Alpharetta, Ga.-based company said the primary endpoint's 5.5 percent S. aureus incidence rate was consistent with the assumptions used to design and power the trial.

The negative findings prompted Joel Sendek, of Lazard Capital Markets LLC in New York, to forecast a dim outlook for Veronate. "Based on the data, we no longer believe the drug will be commercialized," he wrote in a research note, conceding his previous estimate for a launch next year. Less than two months ago, Inhibitex still was detailing its pricing strategy to investors and began a rolling biologics license application. (See BioWorld Today, Feb. 15, 2006.)

In the relative near term, Johnston said the company would go beyond the top-line data and conduct further analyses and laboratory studies to attempt to reconcile the Phase III findings with prior results. Phase II results had showed a clear dose-response relationship and demonstrated a 63 percent reduction in the incidence of S. aureus infections among infants treated with the drug, as well as a 67 percent reduction in Candida species (fungi). In addition, Inhibitex will convene outside consultants to review all findings related to the Veronate program, after which the appropriate next steps will be determined.

Sendek noted that in spite of further data mining, "we view the likelihood that Veronate will be salvaged as minimal."

Inhibitex's lead product candidate, the drug has fast-track and orphan drug designation from the FDA, in addition to orphan product status in Europe. It targets specific proteins found on the surface of staphylococci, called MSCRAMMs, an acronym for microbial surface components recognizing adhesive matrix molecules.

In the study, infants born with weights between 500 grams and 1,250 grams were randomized with equal probability to receive either 750 mg/kg of Veronate or placebo in a series of up to four intravenous infusions administered at intervals over their first two to three weeks of life. Its primary endpoint was to demonstrate the drug's efficacy in preventing S. aureus-based bloodstream infections, and secondary endpoints included reductions in the frequency of bloodstream infections caused by Candida species, as well as those due to coagulase-negative staphylococci, and a reduction in all-cause mortality.

There were no significant differences in frequencies of adverse events between the treatment and placebo groups.

Johnston said complete data would come out at the end of this month at the American Pediatric Society meeting in San Francisco.

While Inhibitex, which has all worldwide rights to Veronate, tries to sort out its questions on the drug, the company plans to move forward with its second most advanced product, Aurexis, which is set to enter additional clinical studies. Johnston said Inhibitex intends to begin a multi-dose safety and pharmacokinetic trial in 28 S. aureus patients pending final discussions with the FDA.

The company also has all worldwide rights to Aurexis, which was developed from the same MSCRAMM technology platform as Veronate, and given that they target the same protein on S. aureus, Sendek expressed a "reduced confidence" in the Aurexis program. However, he noted that Aurexis is more specific to S. aureus as it is a humanized monoclonal antibody, while Veronate is a polyclonal antibody

Lazard downgraded Inhibitex's stock, as did several other firms. On Monday, the shares (NASDAQ:INHX) fell $4.79, or 66 percent, to close at $2.47, a 52-week low. Volume was heavy, more than 10 times the daily trading average of about 142,000 shares.