Shares of Curis Inc. fell more than 30 percent when the company, along with partner Genentech Inc., halted patient enrollment in the first part of a Phase I trial of its basal-cell carcinoma drug after preliminary data failed to show a complete clearance of skin lesions.

However, the companies are moving ahead with the second portion of the trial to further evaluate the biological activity of the drug, a topical antagonist of the Hedgehog signaling pathway, and Curis President and CEO Dan Passeri said the companies have no plans to cease development at this time.

"We're not terminating the program," he said. Right now, the plan is to "gain further insight into the mechanism and penetration of the compound, and its activity," so that, by the end of the Phase I study, "we'll know what our options look like."

This news caused Curis' stock (NASDAQ:CRIS) to fall 33.4 percent. Shares closed at $2.61 Tuesday, down $1.31. Genentech's shares (NYSE:DNA) gained 58 cents to close at $86.20.

The trial was intended to test the drug's safety and tolerability during a four-week treatment regimen in patients with a single or multiple basal-cell carcinoma, the most common form of skin cancer.

But the trial also was designed to evaluate the product's efficacy, which is defined as clearance, or complete eradication of skin lesions, to determine its viability as a treatment for basal-cell carcinoma (BCC), Passeri said.

The first segment of the trial randomized 29 patients to evaluate four different dose levels, and those results were reviewed by an internal data review board at Genentech.

The compound was safe and well tolerated, Passeri said, and "we did see some clearance, which is quite optimistic," he told BioWorld Today. "But in order to justify going forward with the existing compound and existing formulation, we need to have a level of confidence that it warrants spending the significant resources and capital" for further trials.

That's especially important for Cambridge, Mass.-based Curis, which a year ago exercised its co-promotion option for the drug in the U.S. to share in both the development costs and any sales revenue. The company estimated that it would incur about $20 million in development costs to get the product through Phase II trials.

"We're going to continue with the second portion [of the Phase I trial] to try to clarify and decipher the level of activity, and to understand what's occurring biologically," Passeri said. "When that's completed, we have a number of alternatives available."

The study is expected to finish during the first half of this year, and the final results will determine whether the drug moves to Phase II testing. If not, the companies said they intend evaluate a number of possible options, such as extending the treatment regimen, reformulating the drug, selecting a different drug candidate for the BCC indication or negotiating the return of the compounds to Curis.

Though considered a non-aggressive cancer, BCC affects between 800,000 to 1 million people in the U.S. each year. It's commonly caused by chronic exposure to sunlight, and can manifest as growths, bumps or red patches, often on the face, neck or hands. BCC is effectively treated with surgery, "but that can result in scarring in cosmetically sensitive regions," Passeri said.

If it's able to demonstrate the required efficacy, Curis' topical treatment "could be a very important drug in terms of market potential and in addressing the unwanted side effects of surgery in BCC patients."

The product is aimed at the Hedgehog signaling pathway, which controls the development and growth of tissue by promoting cell division, and has been found to be highly activated in BCC.

Curis and South San Francisco-based Genentech signed the potential $240 million deal in 2003 to develop and commercialize Curis' Hedgehog antagonist technologies. Genentech recently licensed a separate Hedgehog antagonist from Curis to investigate as a systemic treatment for solid tumors. Passeri said that candidate is designed to work using a different mechanism from the topical BCC drug. (See BioWorld Today, June 12, 2003.)

Last spring, the companies signed a second deal, that one to identify small-molecule modulators of a pathway that controls progenitor-cell proliferation and differentiation. If two candidates reach the market from that partnership, Curis could receive up to $149 million. (See BioWorld Today, April 5, 2005.)

The company reported a net loss of $3.6 million, or 8 cents per share, for the third quarter. As of Sept. 30, it had cash, cash equivalents and marketable securities totaling $42.9 million.

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