Merck's call on vernakalant a blow to Cardiome

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With the fate of oral vernakalant, so goes Cardiome Pharma. The company’s share price had sunk precipitously over a year and a half with stop-start development on the project, and with the news that Merck & Co has pulled the plug on the pill version of the intravenous atrial fibrillation drug Brinavess, investors sliced its market capitalisation to cash levels yesterday.

The New Jersey partner cited the regulatory environment for its decision, with the suspension of the Pallas trial for fellow anti-arrythmic Multaq increasing the risk that oral vernakalant would face impossibly high hurdles. Whilst Cardiome believes it can achieve profitability in 2014 with job cuts and growing IV royalties, without the oral programme it will be some time before the Canadian company can excite investors once again.

Unlucky

Vernakalant has been a most ill-fated compound. In 2008 it was turned back by US regulators in its IV formulation on safety grounds. Development of the drug had also been hindered due to the rights split between Astellas and Merck. Things appeared to be getting back on track last year when Merck took global control of the compound (Merck takes charge of vernakalant, July 27, 2011). In the IV formulation, it is approved in the European Union and in a total of 37 countries; EvaluatePharma’s consensus forecast puts sales at $214m in 2016.

In light of the Multaq experience, there was reason to question the promise of oral vernakalant. The Sanofi anti-arrhythmic has faced continuing safety questions; once marketed it failed to expand its target population and has reported disappointing sales numbers (Sanofi's Multaq destined to disappear from the radar, September 23, 2011).

The few analysts who cover Cardiome project royalties of less than $100m a year for vernkalant – Oppenheimer at $80m in 2014, Wedbush at $31m in 2013, and Leerink Swann rising to $45m in 2016. This represents a steady income, to be sure, but investors clearly had been betting on the oral version of the drug being worth a lot more. Leerink Swann analysts today slashed their price target on Cardiome stock from $9 to $1.

The announcement yesterday sent shares 54% lower to a record low of 88 cents, and they have shown little signs of revival in early trade today.

Tightening the belt

In a call with investors, chief executive Douglas Janzen said the company was now focusing on cutting its cash burn roughly in half, from $29m to $15m a year. The company ended 2011 with $53m in cash. With the expectations of rising royalties, Janzen said the company hopes to end 2014 in a position to be a profit-making company.

It was not clear whether Merck would be handing back rights; Mr Janzen said the company will be reviewing the terms of its deal. But even if it does regain ownership, with a spotty development record it will be difficult to lure a new partner and Cardiome is not in a position to play hardball in any talks.

Executives said they will be reviewing the company’s business strategy and will be updating its investors after that, but it is unlikely to excite the markets. With no active clinical projects aside from oral vernakalant and profitability more than two years away, few good options await the company.

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