Closing the door on XTL Biopharmaceuticals

News that XTL Biopharmaceuticals’ bicifadine failed in phase IIb trials to treat pain associated with diabetic neuropathy adds weight to the view this indication is something of a graveyard for drug development, whilst providing a classic example of the risks associated with pursuing the development of a product which has already reported a number of clinical failures.

Given that bicifadine is XTL’s only clinical stage product, the 95% crash in the Israeli company’s shares in early trade today, from $2.23 to a record low of $0.12, is harsh but understandable as the clinical failure raises serious question marks over the company’s immediate future with current cash reserves all but exhausted.

Severe setback

Whilst losing almost 100% of their investment is enough to make existing shareholders feel pretty sick today, the pain is probably worse given that for most of the year XTL’s shares had remained fairly steady and represented one of the best performing pharma stocks in August (Companies on the way to being 2008's winners and losers - Rest of the world focus, August 7, 2008).

Today’s dramatic share price loss perfectly illustrates the pitfalls behind an “all your eggs in one basket” approach to drug development, particularly as the warning signs were already posted in bright neon lights.

Initially discovered by Wyeth, bicifadine clearly failed to make the initial grade and was out-licensed to Dov Pharmaceutical in 1997, who then set up a joint venture with Elan in 1999 to develop the drug, only for Elan to decide against pouring more money into the product in 2003. Dov continued development until phase III data in chronic pain failed to demonstrate any signs of efficacy, causing Dov’s shares to lose half their value in April 2006; the stock has been in terminal decline ever since.

Nevertheless, Dov staged something of a coup in January 2007 by convincing XTL that bicifadine was worth developing for diabetic neuropathic pain, admittedly for a relatively modest upfront fee of $7.5m, of which Dov had to pass on $5m to Wyeth.

Quite what XTL’s business development team saw in bicifadine’s potential that Wyeth and Elan failed to spot will remain a mystery, but given the warning signs, today’s failure should not have come as such a shock.

Future in doubt

Given that EP Vantage already highlighted XTL as one company forecast to run out of cash by the end of this year and could therefore struggle in the current financial crisis (Companies feeling acute credit crunch pain, September 26, 2008), the outlook for XTL looks particularly bleak.

Lacking cash and a tangible clinical stage asset, XTL’s management team will do well to engineer any kind of long-term survival.

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