Wednesday, June 20, 2007

Sometimes the Bear Gets You: Coley Pharmaceuticals Edition

Coley Pharmaceuticals shares lost more than half their value today after its partner Pfizer discontinued work on its lead lung cancer compound.

The nail in PF-3512676's coffin was an independent data safety monitoring committee's verdict that a mid-trial analysis suggests the compound plus chemotherapy works no better than chemo alone.

PF-3512676, previously known as Promune (and also as CPG7909), was snatched up by Pfizer in 2005 in a deal worth up to $515 million. The compound was supposed to work by triggering the immune system through stimulating toll-like receptor 9 (TLR-9).

This is the second TLR-modulating drug that has crashed out of the clinic after being dealt to a big pharma for top dollar. Novartis bought rights to Anadys's ANA975 drug, a TLR-7 agonist, for hepatitis C only a few months after the Coley/Pfizer deal. That drug's Phase Ib program remains on clinical hold by the FDA after preclinical tox studies unearthed a potential safety signal last summer. Merck also signed a broad TLR deal with Idera in late 2006; that deal is ongoing.

Coley will hold a conference call later this afternoon.

UPDATE: Coley's call provided little in the way of further information specific to '676. Pfizer is leading the data analysis, according to Coley CEO Bob Bratzler, who described the company as "dumbfounded" and "shocked" at the news.

CSO Art Krieg aimed to confine the bad news to these particular trials and drug combinations, saying "this is a setback for this approach to the treatment of lung cancer in these particular combination regimens ... [but] the mechanisms are validated and we don't think the impact of this will be enormous beyond these approaches." Cancer drug development is challenging, he added, and a lot of successful drugs have failed multiple clinical trials before approval.

Perhaps. But the snafu puts Coley in a tight spot. At last glimpse--end of Q1--the firm had $97 million in cash reserves; yesterday's news sunk Coley's market cap to $91 million. Even considering the firm's estimated burn of about $3 million per month, the market is now placing zero value on its technology platform, its partnered projects with GSK and Sanofi-aventis (and the future of the Pfizer collaboration), as well as its various preclinical activities in RA, lupus and oncology. There is blood in the water.

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