Globes" was first to report that Phase III clinical trials of dexanabinol had failed. Pharmos CEO Haim Aviv: Funds we raised were exactly for a rainy day like this.
Gitit Pincas 20 Dec 04 20:49
The dream is over. The great hope, the promise, all these were ripped asunder today when drug discovery company Pharmos (Nasdaq:PARS) announced a clear failure in clinical trials of dexanabinol. No wonder the share has dropped 67.43% (as of web-posting), its market cap dropping from $240 million to $107 million.
This afternoon, "Globes" was first to report that Phase III clinical trials of dexanabinol had failed.
"We feel very disappointed and even a little confused. Many years of hard work and lots of hopes were dashed," Aviv said today. "We said this is a risky business, we alternated between aspirations and apprehensions for many years. Still, it is a definite crisis point in a company's history, when a central asset doesn't succeed. As I said recently, the Pharmos story isn't binary, at least not in the extreme sense of the word, as we have a few other things in one or another stages of development. We're confident that there is life after a crisis like this, but it's definitely not easy.
"During the whole of the last period, I refused to play the game of speculating about our chances. I said only that if we succeeded, this was a billion dollar market," Aviv said. "We took a big risk, and if I have to find something positive in that, I'm glad that no one was harmed during our clinical trials. The main parameters of the trial failed, so there's no reason to pursue the results any further. It was very clear, to our regret, that traumatic brain injury (TBI) remains a far more complicated problem than science though it was."
Every year in the US, 300,000 TBI incidents are admitted to hospital emergency wards, of which 52,000 of these incidents end in death and 80-90,000 suffer from paralysis and other long-term limitations. Pharmos failed to significantly reduce the TBI mortality rate.
In one scenario, Pharmos goes back to being a little start-up, with a great deal of potential within reach.
The old cliche, "the harder they come, the harder they fall," or in this case, the bigger the hope, the bigger disappointment, is very apt today. As was reported by this paper more than once, Pharmos had all the elements of a dramatic success story, and for weeks now, tensions were high. But painful reality has now set in for Pharmos investors and management. "No one said it was going to be easy to develop an ethical drug and bring it to market," Aviv said today, "and we constantly made the risks clear."
The only Israeli company that has succeeded to date in marketing an ethical drug in commercial, billion-dollar quantities is Teva Pharmaceutical Industries Ltd. (Nasdaq:TEVA; TASE:TEVA), which developed Copaxone for multiple sclerosis (MS).
In all fairness to Pharmos, it must be pointed out that statistically speaking, drugs which succeed in Phase II trails have a less than 30% chance of succeeding in Phase III. "The drug's mechanism was very logical, and Phase II trial results were encouraging, but it could certainly happen that Phase II might be good, and Phase III might fail. We couldn't have known something like that," Aviv says.
Preventing a breakdown
Yesterday evening, New York time, results of the double blind Phase III trial were revealed to Pharmos executives in such a way that no one had the whole picture before them. "I have to deal with investors and various factors within the company, to make sure there won't be a total breakdown," Aviv says. "After that, we'll decide what's next."
What do you think of the share collapsing? Do you understand the investors?
"Absolutely. I'm as sorry as they are, and I understand them. They put their faith in us, and I would have been happy if they'd made some money. Naturally, I prefer to announce successes, but that isn't the case today."
What about the field of TBI? Is there a chance that a treatment will be found?
"We mustn't forget that beyond the investors and the company, we made the a major professional effort, the first of its kind, to develop a drug that would help TBI sufferers. Now we know that success in this field will be very difficult, and that we don't have enough knowledge. It's too bad that our research will go for naught."
Dexanabinol's other "parent" is Prof. Raphael Mechoulam of the Hebrew University of Jerusalem, who discovered, researched and synthesized the molecule on which dexanabinol is based. Mechoulam has been waiting since the Sixties for some good news.
"I'm very sorry about the test failing," Mechoulam said today. "And I feel sad on the personal as well as on the professional, medical level. There is no drug like this today, and a lot of people could be saved from dying, but that won't happen anytime soon." Mechoulam is less sure than Aviv that the drug has seen its last, even though Pharmos has decided against continuing testing it. He is also willing to offer some explanations as to why the trial failed. "I think there are a few reasons why. I don't believe that it didn't work at all, as it worked very well on animals, and there's no reason why it shouldn't work on humans. But it's important to understand that within the clinical trial framework, TBI victims have to be given the drug immediately, but because family consent is required, there's a delay and it takes longer. Perhaps if the drug had been given within two hours -- which isn't technically possible -- it might have succeeded." Mechoulam summed up by saying it was too bad about the people involved who had invested so much time and money.
Dexanabinol for TBI is over and done with. So what does Aviv mean when he says that the company still has something to offer?
Pharmos recently announced the results of an exploratory Phase II study of dexanabinol as a preventative agent against post-surgical cognitive impairment in coronary artery bypass graft (CABG) surgery patients. The study provided evidence that dexanabinol may act as a neuroprotectant by preserving integrative and executive functions that may be the most affected by CABG surgery. The company will study the data from both the CABG and TBI trials in order to determine the best path forward to develop the potential value of dexanabinol as a neuroprotectant.
Aviv's comment today may also be a bit disappointing. "We're still analyzing the Phase II clinical results, and by mid-year, give or take a month or two, we'll continue with Phase II, but we can't move directly on to Phase III. We're still undecided on this point, and it may be that we'll have to conduct two Phase II trials. Now we can move full steam ahead on this protocol." As for PRS 211,375, for the treatment of pain indications, Aviv notes that there will be announcements of developments in mid-2005, apparently at the same time that clinical trials commence.
"No doubt that plans for CABG were delayed, and it don't know whether willing investors can be found at this stage," Mechoulam says candidly. "But I'm not involved in this process."
Significant potential
"We believe that the pipeline represents significant potential value for the company, Pharmos president and COO Dr. Gad Riesenfeld stated today. "We are fortunate to have what we believe are both the necessary resources to carry these programs forward and the experience necessary to develop drugs and shepherd them through the approval process."
How could the drug work on CABG and not on TBI?
Aviv: Both are related to the nervous system and the brain, but data can't be extrapolated from one to the other. TBI is a form of massive damage, while CABG is less severe. It might work there, where the injury is smaller.
What Pharmos has going for it right now are the funds raised in recent years. "Clearly, if we didn't have money, we'd be in trouble, so you can see how important those issues were," Aviv says. "Those fundraising rounds were intended for exactly this purpose, for a rainy day like this one. We have $60 million in cash, and that should be enough for us to carry out our plan."
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