Axonyx Inc. lost almost two-thirds of its value on Monday with news that its lead Alzheimer's disease product, Phenserine, failed in a European Phase III trial.

The company's stock (NASDAQ:AXYX) plummeted 62.7 percent, or $3.04, to close at $1.81.

Top-line results of the trial, which recruited 384 mild to moderate Alzheimer's patients from 16 sites in Spain, the UK, Croatia and Austria, showed that Phenserine did not reach statistical significance for the primary endpoints following 26 weeks of treatment. However, the therapy did show encouraging trends.

"The drug arms did work. The drug clearly works," said Colin Neill, chief financial officer for New York-based Axonyx. "I would characterize this more as a failed trial, not a failed drug."

Phenserine-treated patients performed better than placebo-treated patients in the primary endpoints, the ADAS-cog and CIBIC assessments, at all time points, but there was a higher-than-expected placebo response. ADAS-cog is the activity severity test for cognition, the most standard endpoint for Alzheimer's therapies, and CIBIC is the clinical interview-based impression of change.

Neill said that all Alzheimer's trials have an initial placebo response.

"After a short amount of time, the placebo arm will gravitate toward the baseline. It will fall off, whereas the drug arms will not," he told BioWorld Today. "In the case of our trial, the placebo arm did not move back to baseline."

The company is poring through the data to determine why the placebo response was so high. Patients enrolled in the trial were screened with a mental state examination using a 30-point scale, with 30 indicating the person was fully functional. Only patients that had a score between 13 and 23 were enrolled in Axonyx's Phase III trial.

"This is only speculation," Neill said, "but if those admitted were skewed more toward the fully functional side, then the placebo may have performed much better" than expected.

Patients enrolled were randomized to receive placebo, Phenserine 10 mg twice daily or 15 mg twice daily for six months. They were regularly assessed using the standard cognition and memory assessments. Researchers have found no safety or tolerability concerns associated with Phenserine.

Axonyx began a second Phase III trial in June, also testing Phenserine at 10 mg twice daily or 15 mg twice daily using the standard memory and cognition exams. (See BioWorld Today, June 17, 2004.)

In September, Axonyx initiated a third Phase III cognition trial, which also is enrolling 450 patients. Neill said the second and third Phase III trials should be fully enrolled by the middle of this year and the first results could come out six months later.

Interim results from another trial, a Phase IIb study, should be available before the end of March. That trial began in June 2003, about the same time as the first Phase III trial. The Phase IIb is enrolling 150 patients, evaluating Phenserine's ability to lower levels of beta-amyloid precursor protein and beta-amyloid in the plasma and cerebrospinal fluid, which might lead to a slowing of disease progression. Beta-amyloid is overproduced in Alzheimer's disease and Down syndrome.

Phenserine is a dual-action acetylcholinesterase and beta-amyloid precursor protein inhibitor licensed from the National Institute on Aging. It breaks down a neurotransmitter in the brain related to memory and cognition.

Neill said Axonyx simply needs to do a little tweaking to prove that Phenserine, which is not partnered, is an effective therapy for Alzheimer's disease.

"My intelligence tells me that nobody has had a 100 percent batting average with their drugs," he said. "All the [Alzheimer's] drugs on the market - Reminyl, Exelon, Namenda - all had failed trials during the development process."

Both Reminyl (galantamine hydrobromide, Shire Pharmaceuticals Group plc) and Exelon (rivastigmine tartrate, Novartis AG) are products that work by preventing the breakdown of acetylcholine. Namenda (memantine HCL) is an antagonist of the N-methyl-D-aspartate receptor that works by blocking abnormal effects of glutamate. New York-based Forest Laboratories Inc. markets it in the U.S.

Aside from Phenserine, Axonyx has initiated preclinical development of Posiphen, a compound that appears to decrease the formation of the beta-amyloid precursor protein and could be used to treat Alzheimer's disease. The company also intends to further develop Tolserine, another acetylcholinesterase inhibitor and one of the company's butyrylcholinesterase inhibitors. Butyrylcholinesterase is found in high concentration in the plaques taken from individuals who have died from Alzheimer's disease.

As of Sept. 30, Axonyx had about $87.7 million in cash and cash equivalents. Its burn rate in 2004 was about $24 million, Neill said.

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