By Mary Welch

Disappointing Phase IIb results of its encapsulated bovine cell implant for severe, chronic pain sent CytoTherapeutics Inc.'s stock plummeting 35 percent, and prompted the company's partner, AstraZeneca Group plc, to end their $41 million collaboration.

Results from the 85-patient, double-blind, placebo-controlled trial did not meet the minimum statistical significance for efficacy that London-based AstraZeneca had established. Patients who participated had pain from cancer that could not be controlled by standard medications such as morphine and whose life expectancy was estimated at five months or less. Patients received an active or placebo implant for 10 weeks.

"Obviously, we're hugely disappointed," said Elizabeth Razee, vice president of corporate communications for CytoTherapeutics. "The results were just unblinded, and we haven't seen them. None of us here has seen the data. AstraZeneca has been a tremendous partner - really four-square - so we know that what they did was for the right reasons."

Although she admitted it was "irrelevant," Razee pointed out that "it was an efficacy issue. It wasn't a device issue." The company "will be looking at ways to use this technology to maximize shareholder value. But, at the end of the day, [the failure] came down to efficacy."

CytoTherapeutics' board will convene next week to discuss options. The company has about $13.4 million in cash, which could carry it into the first quarter of 2000, even without any bottom-line adjustments such as staff layoffs or partnering agreements. It reported a net loss of $12.6 million for 1998, with revenues of $8.8 million. AstraZeneca had contributed $5 million to the company as of June 30.

The company has 15 employees in its Sunnyvale, Calif., subsidiary, StemCells Inc., and 75 at its headquarters in Lincoln, R.I. "Obviously, the board will be making some decisions, and lay-offs certainly would be considered," she said, adding the company is "not dying on the vine."

Although efficacy previously has not been an issue, the technology showed some glitches. Troubles began early last year, when the implant capsules of three patients (out of 17) broke in a Phase IIb European cancer-pain study. The companies modified the surgical procedure, and modified the tether used to implant the device, before continuing with the trial in July 1998. Because of the modification, AstraZeneca increased its financial support for the program by 20 percent to $8.5 million for the year. (See BioWorld Today, Jan. 20, 1998, p. 1 and BioWorld Today, June 16, 1998, p. 1.)

The drug, CereCRIB, is based on CytoTheraputics' cellular replacement by immunoisolatory biocapsule, which contains the adrenal cells of newborn calves. CereCRIB is implanted surgically at the base of the spine, where the bovine adrenal cells, contained in a semi-permeable membrane, release natural analgesics, such as catecholamines and opioid peptides, into the fluid space of the spinal column. The biocapsule is designed to be compatible with human tissue, and to protect the xenogenic cells from rejection by the patient's immune system.

The company has described the capsule as similar to a spinal tap. The capsule, seven centimeters long and one millimeter wide, must remain floating in the cerebrospinal fluid.

The two companies started their alliance in 1995, with AstraZeneca (then Astra AB, of Sodertalje, Sweden) agreeing to pay up to $41 million, including a $5 million up-front fee and $5 million annually for four years to cover research costs. (See BioWorld Today, April 3, 1995, p. 1.)

"While this is not the win we were hoping for, we have different battles to fight," Razee said. "I know what we have coming up in the second half of this year. So, instead of a win-win situation, we'll just have a 'win.' I'll take that. A lot of companies have a setback and keep on going - and succeeding."

The company is moving on to its second lead product, stem/progenitor cell technology platforms, in preclinical development and seeking a development partner. The program seeks to repair or repopulate neural or other tissue that has been damaged or lost as a result of disease or injury. "We'll be having some news soon," Razee said.