A confirmatory Phase III trial meant to boost the lupus drug Prestara from an "approvable" status onto the market proved disappointing for Genelabs Technologies Inc., causing its stock to plunge 70 percent.

The trial failed to meet its primary endpoint, showing that Prestara did not increase bone mineral density at a statistically significant rate when compared to placebo.

"We're very disappointed by the news," said Matthew Loar, the company's chief financial officer. "While we didn't reach the clinical endpoint, let's not close the book on Prestara, because there is a lot of analysis to do."

The company's stock (NASDAQ:GNLB) lost 65.6 percent of its value, dropping $1.70 on Tuesday, to close at 89 cents.

Redwood City, Calif.-based Genelabs received an approvable letter for the drug two years ago. Final approval was pending positive results of the latest study, called GL02-01. (See BioWorld Today, Sept. 3, 2002.)

The double-blind, placebo-controlled trial was designed to measure the effect of Prestara on the bone mineral density of women with systemic lupus erythematosus receiving glucocorticoids. Genelabs plans to analyze the data further and will meet with the FDA to determine the next steps.

"We're just getting this information right now and we have quite a few analyses to do before we understand what happened in this clinical trial and why we didn't reach the primary endpoint," Loar told BioWorld Today.

The negative results are in contrast to the company's other Phase III trial, on which the original new drug application was based. That trial, called GL95-02, had a nested study that indicated that patients receiving Prestara had increased bone mineral density, compared to a decrease in bone density for patients on placebo. It included 55 patients, while the failed GL02-01 study included 155 patients. In both trials, the analysis checked bone mineral density of the lumbar spine.

As Genelabs looks closer at the data, it will try to determine what was different about GL02-01 that could have caused the negative outcome.

"The treatment duration was less, and these patients were on higher doses of glucocorticoids," Loar said. "But we don't know yet if these were factors for not meeting the endpoint."

In June, Genelabs withdrew its European marketing authorization applications for Anastar (Prestara) after the European Medicines Agency indicated the data submitted would not support approval. Genelabs is working with European authorities to address the issues.

With orphan and fast-track designations and priority-review status for Prestara, Loar said the company thought data from one Phase III trial were sufficient for approval when it filed with the FDA. The company also had data from a steroid-sparing Phase II/III trial that showed active lupus patients could reduce their steroid doses when taking Prestara.

Loar said the disappointing Phase III data from GL02-01 should not affect its partnerships for Prestara with Corona, Calif.-based Watson Pharmaceuticals Inc. for North America, and with Osaka, Japan-based Tanabe Seiyaku Co. Ltd. for Japan.

"With Watson, in particular, we're charged with doing everything to get the drug approved," he said. "It's our responsibility to do that."

Loar said the company had about $19.5 million - a year's worth of cash - at the end of the third quarter. That amount does not include an $8 million up-front payment the company is getting through a research collaboration with Gilead Sciences Inc., of Foster City, Calif. Just last week, the companies entered the deal for hepatitis C compounds. Gilead gets exclusive worldwide license rights and would pay Genelabs a royalty on sales. Each compound developed by Gilead is worth up to $38 million in milestone payments for Genelabs. (See BioWorld Today, Oct. 1, 2004.)