Adamas gets punished for honesty

Many biotechs scoring a borderline clinical trial win would trumpet the fact and press on. Not so Adamas Pharmaceuticals, which yesterday threw in the towel on developing Gocovri for walking impairment in multiple sclerosis after seeing data from Inroads, a pivotal trial. This succeeded statistically, showing a 21% response rate for Gocovri versus 11% for placebo, but to its credit Adamas admitted that the result lacked clinical relevance; the trial had attempted to show a 33% response rate versus 20% with placebo, so it looks like an underperforming control cohort flattered the data. Unfortunately the markets did not reward Adamas for its honesty, and the stock plummeted 43% yesterday. Gocovri is approved for Parkinson’s dyskinesia, but its 2017 launch disappointed, and MS walking impairment was an expansion opportunity. With a second pivotal study in the new indication now not going ahead, Adamas’s newly appointed chief executive, Neil McFarlane, must effect a turnaround in Parkinson’s. A separate problem concerns intellectual property: Gocovri is an extended-release formulation of off-patent amantadine, and investors will have little clarity on its potential until Adamas settles with patent challengers.

Gocovri sales forecasts ($m) before yesterday's clinical trial setback
  2017 2018 2019e 2020e 2021e 2022e 2023e 2024e
Parkinson's dyskinesia 1 34 58 92 135 166 198 237
Multiple sclerosis walking impairment 0 0 0 0 10 46 84 120
Source: EvaluatePharma sellside consensus.

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