August has given traders little reason to rush back into development-stage biotech companies. What seem like weeks of futility were capped in recent days by clinical failures for Auris Medical and Cerulean Pharma, with the latter company seeing its shares plummet to below cash levels as a result.
Auris’ tinnitus project AM-101 showed no benefit for acutely affected patients on two measures in a phase III trial, while Cerulean slashed its workforce nearly in half after the phase II failure of CRLX101 in kidney cancer. Taken together with Aurinia Pharmaceuticals’ lupus nephritis stumble and Portola Pharmaceuticals’ surprise FDA rejection, the week will not have encouraged investors hoping to revive the biotech bubble.
Drug failure 101
Switzerland-based Auris was aiming to get AM-101, or Keyzilen, approved as the first therapy for tinnitus. The inner-ear injection blocks NMDA receptors in the cochlea, which the group believes leads to dysfunctional stimulation of auditory nerve fibres.
However, the 343-patient TACTT2 trial did not show AM-101 to reduce tinnitus loudness or burden, the two primary endpoints of the trial, when compared to placebo. A 330-patient European phase III trial, TACTT3, is expected to read out in the fourth quarter. The company says it plans on meeting with regulators to discuss AM-101’s outlook before TACTT3 data emerge (Upcoming events – Schizophrenia and tinnitus data from Intra-celluar and Auris, August 5, 2016).
Shares Auris fell 60% yesterday following the news. The group is now valued at $74m, and has cash holdings of $33m.
Meanwhile, Cerulean had high hopes for CRLX101 in advanced kidney cancer. The Massachusetts group specialises in nanoparticle-drug conjugates, and CRLX101 seeks to deliver highly toxic topoisomerase 1 inhibitor camptothecin directly to tumour cells.
The trial of the drug in combination with Avastin in relapsed renal cell carcinoma, however, showed that the CRLX101 did not extend progression-free survival more than the standard of care – 3.7 months for the CRLX101 combination compared with 3.9 months for standard of care – in a population with clear cell disease. CRLX101 also had a numerically lower objective response rate, 5% versus 14% for standard of care.
Cerulean shares tumbled 56% yesterday following the group’s announcement, made post-market Wednesday. It is now valued at $33m, below its June 30 cash balance of $47.2m, which the group reckoned was sufficient to fund it at least through the second quarter of 2017. Raising money through a secondary offering is not looking like a plausible scenario following the negative data.
The company cut 23 full-time employees, or 48% of its workforce, reducing its cash burn by $5m a year.
Another development-stage company, Juniper Pharmaceuticals, also had a setback, with a phase II trial of its bioadhesive lidocaine vaginal gel, COL-1077, failing to show a reduction in pain in women undergoing endometrial biopsy.
While the broader Nasdaq biotechnology index spent July battling back from a post-boom nadir at the end of June, growth has not been sustained in August. It has not helped that the sector has seen setbacks in what were formerly the most promising areas of development like immuno-oncology and microbiome therapeutics, thanks to Opdivo’s lung cancer stumble and SER-109’s flameout.
But following three years in which valuations became implausibly stretched, a dose of realism is needed in biotech investing.