Isis Pharmaceuticals (ISIS:Nasdaq - news - commentary - research - analysis) quickly dropped 22% Friday afternoon after a sell-side analyst issued a downgrade note in which he claims that the biotech firm's key cancer drug failed a late-stage clinical study.
UBS biotech analyst Andrew Gitkin cut his rating to reduce from buy based on his belief that a phase III clinical study of Isis' drug Affinitac is not showing any significant benefit in lung cancer patients. Isis is expected to release results from this study in the first quarter of 2003.
"Our downgrade reflects heightened concerns regarding the impending release of phase III data for Affinitac," Gitkin wrote. "Recent conversations with investigators involved in the trial have not supported or increased our confidence about a successful outcome to this trial." Gitkin's firm has a banking relationship with the company.
Isis shares were off $1.70, or 22%, to $6.21 in recent trading Friday.
Affinitac is a somewhat controversial drug because it relies on an unproven technology called antisense. These kinds of drugs are actually snippets of genetic code that work by infiltrating cells and preventing the expression of certain harmful proteins.
In Affinitac's case, it is designed to inhibit a protein that's believed to play a role in the development and growth of cancer cells. The 600-patient, phase III trial was designed to see if a combination of Affinitac and chemotherapy would be more effective than chemotherapy alone in patients with recently diagnosed, or first-line, non-small cell lung cancer.
In August 2001, Eli Lilly (LLY:NYSE - news - commentary - research - analysis) signed a partnership deal with Isis to codevelop Affinitac. At that time, the deal was seen as a validation of the antisense technology.
Along with Isis, shares of Genta (GNTA:Nasdaq - news - commentary - research - analysis) are down 9% to $9.41 Friday because the company is also trying to develop an antisense cancer drug, dubbed Genasense. Genta will be presenting some midstage test data on Genasense at the American Society of Hematology meeting taking place this weekend.
Gitkin's Isis downgrade Friday follows more than a week of rumors regarding the failure of the Affinitac trial that have spread across Wall Street's biotech trading floors. The rumors have contributed to slow, but steady, selling pressure on Isis shares.
One clinical oncologist familiar with the Affinitac test results told TheStreet.com that the lung cancer study has likely failed, based on unaudited test results that have been completed and available to Isis officials since early last month. This oncologist requested anonymity because the final results from the study have not been reported, but he has no investment position in Isis stock.
Isis executives did not return phone calls seeking comment.
In his research note, Gitkin wrote that Isis could trade down to a range of $4 to $6 per share (the company has $2 per share in net cash) if the Affinitac lung cancer trial does fail. "While it is difficult to say, we currently believe that there is a 60% to 70% chance of a negative outcome."
A second, 1,000-patient study of Affinitac in lung cancer patients, sponsored by Lilly, is currently under way, with results expected in early 2004.
thestreet.com |
