BioWorld International Correspondent

MUNICH, Germany - Despite positive data on tolerability and efficacy in a Phase I/II trial, MediGene AG discontinued its project to develop a CVLP tumor vaccine against cervical cancer. Before the beginning of the trial, the company had set a target of effectiveness in 90 percent of the patients for continuing the project, and the results of the trial did not reach that level.

"The CVLP vaccine did not come up to the criteria we had determined for a product with commercial value," said Peter Heinrich, MediGene's CEO. "The results of this early stage clinical trial are a clear indication that treatment of cervical cancer and its precursors with a therapeutic vaccine could be a very promising therapy in the future."

The decision is not the end of the line for Martinsried-based MediGene's interest in a vaccine for cervical cancer. Although the company did not see commercial potential in its current candidate, Heinrich said that it is reasonable "to start thinking about the possibility of developing a second generation of the tumor vaccine."

The trial, which included 36 patients who were monitored over 24 weeks, showed only slight side effects and high tolerance for the treatment. Immunological data showed higher T-cell response and antibody reaction when treated. The data were, however, not strong enough for MediGene to go forward.

The CVLP project had been developed together with Schering AG, of Berlin, which also contributed to the program's development costs. The end of the program will bring MediGene approximately €500,000 in additional costs in the second half of 2003. The company said those expenses will be balanced by cost cutting.

MediGene still has five compounds in clinical development, one of which has been submitted for marketing.

The company's stock (TechDax:MDG) fell from €3.25 to €3 on the news. The next day, the company published its annual results for 2002, which showed a loss before interest and taxes of €40.2 million. MediGene expects losses of approximately €30 million in 2003, with the first significant product revenues anticipated for 2004.

The losses, and the company's position of having more cash on hand than its market capitalization, have not discouraged Heinrich. "We will examine possible acquisitions or mergers and act accordingly," he said. He added that there had been no discussions about whether MediGene might be a takeover candidate itself.

Analysts, however, reacted mostly negatively to the end of the CPLV program, and the stock's losses have continued. It closed Monday at €2.55. Bankers Merck Fink & Co. recommended selling the stock, while M.M. Warburg & Co. lowered its rating from "buy" to "hold." Analysts from the Landesbank Baden-Wuerttemburg, a state-backed bank in Stuttgart, reduced their rating from "hold" to "sell."