Renovo could be fatally wounded by trial failure
The UK life sciences sector – the public realm at least - just cannot catch a break. Renovo became the latest company to announce a significant clinical setback today, the failure of a pivotal study of its anti-scarring agent Juvista promptly erasing three-quarters of the company’s market value.
In late-afternoon trade Renovo’s stock market value had plunged to £34m ($54), well below its cash balance of £44m. The company admits the results were a clear miss on both primary and secondary measures and are at a loss to explain why. Although further analysis is ongoing it is hard to see how confidence can be restored after such a finding. Renovo itself made clear the implications of the news - all options for the company are now under consideration, it says, including hoisting a ‘for sale’ sign.
Juvista has long had its doubters but confidence had been returning following a series of successful phase II studies - a US licensing deal signed with Shire in 2007 also helped. Renovo shares had doubled in the last three months, closing at 68.5p yesterday, as bets were placed on a positive outcome for this trial.
The news will also make Shire wince – the now expensive-looking deal it struck included a $75m upfront payment and a $50m equity investment at 200p a share. Towards the end of trading today, Renovo shares were trading at 18.25p, close to record lows.
Shire shares were unmoved on the news; few analysts covering the UK specialty pharma group were forecasting sales for the product, an indication of its unknown quantity.
This is quite a contrast to analysts following Renovo who were broadly positive on the product, some predicting blockbuster potential.
Surprising and disappointing
Juvista contains recombinant transforming growth factor beta 3, which facilitates skin healing, theoretically reducing the appearance of scars. With nothing on the market able to achieve this, the potential in both medical and cosmetic fields is clear.
In the phase III programme Renovo was striving to prove that Juvista could reduce scarring after surgery, and the patients were undergoing scar revision, a procedure performed to improve the appearance of a scar.
Following surgery, one end of the scar was treated with Juvista and the other with a placebo substance, once after wound closure and again 24 hours later. Photographs were taken to track the healing process and the primary endpoint was improvement after 12 months, as assessed by clinical experts and the patients, respectively the primary and secondary endpoints.
Mark Ferguson, Renovo’s founder and chief executive, described the failure as “extremely surprising and bitterly disappointing”.
Although clear differences could be seen between the ends of individual scars, this was not correlated with treatment with the active agent. The only explanation Professor Ferguson has at this stage is that the variation that naturally causes opposite ends of a scar to heal differently occurred to a greater degree than had been seen before.
This might mean much larger trials are required to show efficacy in this setting, he said on a conference call today.
Further analysis is needed to determine whether further work is warranted on Juvista and Professor Ferguson stressed every option will be considered – from pushing on, to seeking a buyer or winding the company up and returning cash to shareholders.
Founded in 2000 by Professor Ferguson and another skin regeneration expert, Dr Sharon O’Kane, Renovo is widely appreciated to have built huge expertise in wound management. With a couple of products coming up behind Juvista and a healthy cash pile, Renovo is bound to attract interest if a 'for-sale' sign is hoisted.
This could also persuade the company to push on, even if Juvista is abandoned. Unfortunately Renovo is the last in a line of disappointments for the UK’s life science sector (Antisoma's latest setback could prove fatal, January 31, 2011).
The company is going to have to come up with some persuasive arguments if it does decide to push on, with or without Juvista, and building a recovery on the stock market will be a mammoth task.