Curis drops on second hedgehog setback but could value be hibernating?

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Curis was punished on the stock market for the second time in as many months yesterday after releasing a disappointingly opaque announcement on a phase II trial of its lead candidate, the hedgehog pathway inhibitor GDC-0449, in ovarian cancer. In what could politely be described as a vague statement, Curis said further analyses are needed before a decision on continuing development can be taken.

This has prompted investors to conclude that study has, or will, fail and comes at an unsteady time for Curis, following so soon after the drug’s failure in colon cancer (CRC) in June (Prickly response as Curis' hedgehog candidate disappoints, June 17, 2010). However, it is worth bearing in mind that Roche is pitting this first-in-class candidate in numerous tumour types, and phase II data from the most promising setting, basal cell carcinoma (BCC), has yet to be seen. The drug’s potential might seem to be narrowing, and it certainly remains high risk, but it is too early to completely write it off, something that the stock market appears to be doing.

Mechanism of action

The ovarian trial was trying to establish the efficacy of GDC-0449 in blocking re-growth of tumours in patients who had experienced a second or third complete remission following chemotherapy. While no new safety problems were flagged, Curis said Roche informed it that further investigation was needed to “interpret potential clinical activity”, including subset analyses. Then a decision will be made on continued development.

No further information was provided as to what exactly is inconclusive about the data. With results due to be presented at upcoming medical conferences, as well as further information on the failed colorectal study, theories to explain the seeming lack of activity will no doubt emerge.

One theory could centre on whether specific genetic factors are in play or not.

Hedgehog signalling is implicated in the proliferation of tumours. Cancers such as ovarian, pancreatic and breast use this pathway, hence the theory behind inhibitors such GDC-0449. However in cancers such as BCC and medulloblastoma sometimes a specific genetic mutation causes constant activation of the hedgehog pathway, which causes the cancer in the first place.

Stronger efficacy could emerge in tumours with a distinct genetic link to the hedgehog pathway.

Market overreaction?

Still, with this seeming second failure, many analysts appear to be lowering the drug’s overall chance of success. But maybe the situation needs wider perspective.

It is understandable that Roche has been keen to experiment in potentially more lucrative settings, but these experiments could be drawing attention away from areas with a higher chance of success, to the detriment of Curis' share price. The stock opened at $1.50 today, having halved in value so far this year.

Whether there is a read-through from GDC-0449’s failure in CRC and ovarian cancer to BCC remains to be seen. Results from a phase II trial in BCC, which has been designed as a registration study, are due in the first half of next year. So unfortunately investors still have a while to wait before finding out whether the value in this drug really is in hibernation.

GDC-0449 could end up only destined for a niche, hereditary disease market. However, in oncology, whilst that might limit market scope, it does not limit market price, and Curis and Roche could still have a valuable product on their hands.

Whether this will be valuable enough to justify Roche's continuing interest in the product, is probably another factor worrying Curis shareholders.

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