Failure of Novelos’ lead drug proves talk is cheap

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Yesterday’s spectacular failure of Novelos Therapeutics’ lead drug NOV-002, a treatment for advanced lung cancer, should provide a salutary warning of both the difficulty of conducting trials in this notoriously hard to treat disease and also the perils of paying attention to the hyperbole of chief executives.

The data was looking promising to the point that many, including EP Vantage, had believed that the extension of the trial was indeed due to patients in the treatment arm living long beyond the expected 10 months survival of the control group and positive results were almost a given (Event – Pivotal lung cancer data could see Novelos soar, February 10, 2010). But it was in fact the opposite case, with the control group living longer. What might have led the market into hoping that the group would pull off a Dendreon-like rise, covering not only themselves in glory, but also making investors incredibly rich in the process, were comments from Harry Palmin, Novelos’s chief executive.

In interviews as recently as December Mr Palmin had intimated that the length of the trial could be due to the better than expected survival rates in the treatment arm. Yesterday, he had something slightly different to say: “We were hopeful of a positive outcome based on our statistical model simulations and stated assumptions. In retrospect, it appears our simulations were inaccurate due to trial data deviating from our statistical model.”

Tough nut to crack

This “deviation” does, however, show how hard it is for drug companies to get positive results in lung cancer trials where the primary end point is overall survival. In December, Pfizer stopped a phase III trial of antibody figitumumab after an interim analysis showed that it was unlikely to improve overall survival rates.

Yesterday, Novelos, which promised to report the full details of its phase III NOV-002 trial at a conference later this year, was punished severely for its failure, with shares in the company falling by 81% to just 32 cents.

This plunge is not surprising given that the drug was the most advanced in the pipeline and that the few analysts covering the company had pinned their hopes on the success of NOV-002. Novelos’ precarious cash position is also one of the reasons for the fall. Despite raising money from partner Purdue Pharma to the tune of $19m over the last 12 months, the group only had $5.6m in cash as of September 30, 2009.

Hard times ahead

So now without the prospect of raising money either from a licensing deal for NOV-002 or relying on a rocketing share price to raise money on the stock market, there appear to be few options for Novelos to continue without making significant cost cuts, but even these might not be enough to guarantee the survival of the group, which expects results from NOV-002 in a phase II breast cancer trial in the third quarter.

Additionally, given that the rest of Novelos’ pipeline is based on the same oxidized glutathione technology, the failure of NOV-002 could call into question the eventual success of the group’s other drug in development, NOV-205, a treatment for hepatitis C that has just completed phase I trials and is due to begin phase II trials this half.

So with the failure of NOV-002 hanging over the group and investors likely to be wary of anything it says for a while, the bleak-looking future for Novelos was further highlighted today with an additional 14% fall in the shares in early trading to just 28 cents, a 15-month low.

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