LONDON ¿ Shares of KS Biomedix Holdings plc fell by more than 30 percent last week when it announced it was scrapping one of its lead products, KSB301, for the treatment of osteoarthritis, after an inconclusive Phase IIb trial. This is particularly disappointing for the company as it has data showing the compound has a disease-modifying property both in vitro and in animal models.

The study was designed to show the same therapeutic advantage over diclofenac, an existing nonsteroidal anti-inflammatory treatment for osteoarthritis, as was seen in Phase IIa.

The Phase IIb study involved more than 400 patients and 17 centers in four countries. The primary endpoint was the change in spontaneous pain in an affected knee. The secondary endpoints were a combined measurement of pain, stiffness and physical function and the amount of paracetamol taken to alleviate any remaining pain.

Both KSB301 and diclofenac produced an improvement in pain relative to placebo, but there was no statistically significant difference between the two treatment arms. Fewer patients in the KSB301 group needed to take paracetamol, but the difference was not statistically significant.

Steven Powell, CEO of KS Biomedix, said, ¿We are naturally disappointed that the initial results of the Phase IIb study have not underpinned the results from the smaller Phase IIa study. After careful consideration of the positioning of KSB301 in the current marketplace, we have concluded that it is no longer in the company¿s best commercial interests to pursue further development of the product for the management of pain.¿

KS Biomedix¿s share price fell 51.5 pence to #1.10 (US$1.58) when the news was announced Thursday.

Powell said that KS Biomedix, based in Guildford, UK, now would devote more of its resources to its oncology products. Its lead product, TransMID-107R, for the treatment of inoperable brain tumors, is due to enter Phase III trials in 2002.

KS Biomedix acquired TransMID-107R when it took over Canadian company Avicenna Medic Inc. in June 2001. Three other TransMID products are in Phase I oncology trials, and the technology has the potential to be combined with KS Biomedix¿s high-affinity sheep monoclonal antibodies.

Also in June, KS Biomedix took exclusive licenses to three fully human monoclonal antibodies with applications in oncology.

With the failure of KSB301, the company¿s lead product in inflammatory diseases is KSB302 for rheumatoid arthritis, also in Phase IIb studies. KSB302 ¿ unrelated to KSB301 ¿ demonstrated disease-modifying properties in Phase IIa studies and is being developed for a new indication.