Biotechnology investors, who sent Cephalon Inc.'s shares soaring400 percent the last half of 1995 based on two positive late-stageMyotrophin trials for deadly Lou Gehrig's disease, clobbered thestock Friday after learning the FDA expressed concerns about datafrom one of the studies. (See BioWorld Today, Special NewsBulletin, Jan. 19, 1996.)
Cephalon's Myotrophin development and marketing partner, ChironCorp., of Emeryville, Calif., also benefitted in 1995 from results ofthe two Phase III trials as its stock more than doubled from June toDecember. Chiron, one of biotechnology's handful of profitablecompanies, was not affected as severely as Cephalon Friday.
Cephalon plummeted $12.50 to $23.38, a 35 percent drop. Chironended the day down $5.50 to $104, a 5 percent decline.
Edmund Debler, an analyst with Mehta & Isaly in New York,described the announcement of the FDA's concerns as a "serioussetback" for Myotrophin.
"Anytime you have questions at the FDA, history has shown us theycan become complications that tend to linger," Debler said.
Timothy Wilson, an analyst with UBS Securities in New York,likened the news to an earthquake. "Nobody knows why it happened.It just did. It's one of those awful, awful things and we don't haveany reason for it. It's difficult to know what to think because it'sunclear what the problem is."
David Stone, analyst with Cowen & Co. in Boston, called it "atemporary setback. It's unfortunate, but nothing changes our viewthat Myotrophin is an approvable product. We continue to expect itto be approved this year."
The FDA informed Cephalon and Chiron late Thursday the agencyhad questions about data from the second Phase III study conductedin Europe. The FDA was reviewing Myotrophin in response to atreatment investigational new drug (IND) application filed byCephalon.
A treatment IND would permit widespread use of Myotrophin,which is recombinant human insulin-like growth factor (IGF-1), priorto an FDA decision on a new drug application (NDA) for marketclearance. Cephalon was expected to file its NDA early this year.
Cephalon's Jason Rubin, vice president of corporatecommunications, said details of the FDA concerns will not be knownuntil a meeting is held with the government officials. The FDA, hesaid, told the company it had questions about whether the Europeanresults supported the first Phase III North American study, whosefindings were reported in June 1995 and were considered better thananticipated.
The October 1995 results of the European trial were not as strong asthose from the North American study, but Cephalon said findingssupported the positive conclusions from the first trial. In both studies,Myotrophin achieved statistical significance in slowing progressionand lessening severity of amyotrophic lateral sclerosis (ALS), whichalso is called Lou Gehrig's disease.
A Questionable Mortality Rate
However, when the European trial results were reported, someanalysts expressed concern that twice as many patients died in thedrug group as in the placebo group. Officials of the West Chester,Pa.-based companysaid the data showed Myotrophin did not causethe deaths.
Analysts also had commented the European findings were complexand required further analysis to decipher their clinical meaning.
In the nine-month European trial, 124 patients received Myotrophinand 59 were given placebo. Of the 23 patients who died, 18 were inthe drug group and five were in the placebo group. Because therewere twice as many patients taking the drug, the mortality rate wasabout two to one.
David Crossen, an analyst with Montgomery Securities, of SanFrancisco, suggested the FDA was concerned with the excessivedeaths in the European study.
"The data were not self-evident," he said. "It was a complicatedpicture."
But Stone said the FDA issues may involve safety or a problem withone of the many efficacy analyses in the subset of data given to theagency from the European study.
The FDA has not reviewed all results from the trial. However, thedeadline for its decision on the treatment IND was Friday.
A consequence of filing a treatment IND application prior tosubmitting an NDA, Stone said, is more public exposure of the "giveand take" communications that go on normally between the FDA andcompanies seeking drug approvals.
"People are reading this as a conclusion, but the FDA is looking onlyat a subset of the data," he said.
Stone discounted possible concerns about safety. No statisticallysignificant difference was seen in deaths that occurred in the placeboand treatment groups.
He also observed that in the North American study an 18-monthanalysis of patients revealed a six-month survival benefit for thosereceiving Myotrophin.
Rubin said he did not know when Cephalon and Chiron officials willmeet with the FDA. He also said he could not speculate on whetherthe treatment IND decision will change Cephalon's timetable forsubmitting the Myotrophin NDA.
Debler suggested the setback "at best will cause a three- to six-monthdelay in filing the NDA."
At worst, he said, the "doomsday scenario" would involve the FDArequiring an additional clinical trial, which would delay a marketlaunch "a couple of years."
Wilson said, "My conviction is that the product is safe andefficacious but that doesn't lead to it being approved this yearbecause the FDA has a different set of data than us."
Myotrophin Spurred Bull Market In 1995
Cephalon's 1995 clinical trial success with Myotrophin was creditedby many analysts with spurring a bull market industry-wide inbiotechnology stocks after several years of dismal performanceblamed on a series of clinical trial failures.
On June 12, 1995, when Cephalon released positive results of theNorth American study, the American Stock Exchange (AMEX)biotechnology index shot up 10.16 points. That move was describedby analysts as the biggest single day jump in recent memory.
The AMEX index ended the year at 132.83, a 63 percent increasefrom 81.68 at the close of 1994. On Friday as Cephalon fell, theAMEX index tumbled 3.95 points to close at 126.25.
Debler said it remains to be seen if Cephalon's drop will have adamaging effect industry-wide on the gains made last year.
"Investors are more savvy about isolating news," he said."Myotrophin wasn't the only success of 1995."
Including Friday's results, the average price of 236 biotech stockstracked by BioWorld Financial Watch increased 3.97 percent. n
-- Charles Craig
(c) 1997 American Health Consultants. All rights reserved.