While disappointing clinical trial results are not only common, they're what most investors should ultimately expect (only about 10 to 15% of new drugs make it to market). Even so, last week saw three highly-anticipated biotech events all go against long investors. While the prospects for these three stories do vary quite a bit, at a minimum they ought to serve as a reminder that there are no sure things in this space.

Guide To Oil And Gas Plays: We've got your comprehensive guide to oil and gas shales in North America.

Oncothyreon (Nasdaq:ONTY)
Last week, Oncothyreon and its partner Merck KGaA announced that the company's Stimuvax (a cancer immunotherapy) failed in a pivotal trial (the START) trial. The study was powered to show a six-month improvement in overall survival (90% power) in non-small cell lung cancer (NSCLC), but Stimuvax failed to deliver the anticipated benefit, as the therapy likewise failed the secondary endpoint of progression-free survival.

Merck and Oncothyreon reported "positive trends in subgroups," suggesting that Stimuvax may not be dead. Unfortunately, it's almost certainly going to take new pivotal studies to explore these sub-groups; Merck has tried and failed (twice) to get Erbitux approved in the European Union for NSCLC on the basis of sub-group analysis, and the FDA likewise seldom accepts such analysis.

What happens now? Although institutional investors had pretty modest expectations regarding Stimuvax's success, retail investors bought the Stimuvax story and the stock was crushed on the news.

In any case, Oncothyreon still has a potentially promising drug in PX-866 (a PI-3K inhibitor), with Phase 2 data coming in the first half of 2013.

SEE: How To Do Qualitative Analysis On Biotech Companies

Amicus Therapeutics (Nasdaq:FOLD)
While the Stimuvax trial failure was no great surprise, the failure of Amicus Therapeutics' migalastat in a Phase 3 study in Fabry disease was arguably a bigger disappointment. In a study designed to show a nine patient improvement from a placebo, the actual result was just a four patient improvement (13/32 of in the drug group, or 41%, and nine of 32 in the placebo group, or 21%). That difference is not statistically significant, making the trial a failure.

While the study failed to show the hoped for improvement in kidney GL-3 levels, there were several strange things about the study. For starters, the drug didn't work as well in this study as in earlier studies, and though that's not uncommon in cancer drug trials, it's more surprising here. What's more, the placebo response was quite a bit higher than normal - whether that was a product of patient enrollment or other factors, I do not know.

There's still a chance for this drug to work out for Amicus, and its partner GlaxoSmithKline (NYSE:GSK). This was a six-month study, but the company will be continuing on to a 12-month analysis. While good 12-month data would certainly create confusion after this negative six-month data, the FDA is usually more accommodating and flexible on submissions for rare diseases (as has been seen with Sanofi (NYSE:SNY) and BioMarin (Nasdaq:BMRN) in other lysosomal storage disorder drugs). Keep in mind, though, that Amicus has had other trial disappointments and the risk on this name is now considerably higher.

SEE: Pharmaceutical Sector: Does The FDA Help Or Harm?

Hemispherx Biopharma (AMEX:HEB)
We do not normally address sub-$1 stocks at Investopedia, but the case of Hemispherx is strange enough to be worth an exception. Hemispherx has spent the last 16 years casting around for success, but what the company has never done, though, is demonstrate solid and unequivocal efficacy for any of its compounds in clinical trials.

On Thursday, the company faced a FDA panel meeting for its Ampligen drug for chronic fatigue syndrome. At a minimum, investors should read the FDA's pre-panel comments, as it is about as close to a public dressing-down as the FDA ever gives. In short, the agency found that the company didn't follow the FDA's suggestions in regards to running new clinical trials and attempted to get by with post-hoc data analysis.

Not surprisingly, the panel meeting was not an easy or comfortable one for the company, even though it made a lengthy presentation arguing for the drug. Ultimately, the panel had serious doubts about the quality and reproducibility of the data, and voted against approval. While the FDA could, theoretically, overrule the panel and approve the drug that looks like a major long shot given the tenor of the FDA's pre-panel comments.

The Bottom Line
Perhaps there are some CFS patients who could benefit from Ampligen. Unfortunately, I believe that the poor quality of the trials run by Hemispherx (the resulting data) make it a moot point, and I believe this company and stock will continue to serve as clear warnings regarding biotechs that linger on for years at a time and cannot generate interest from proven biotech institutional investors.

At the time of writing, Stephen D. Simpson did not own any shares in any company mentioned in this article.

Related Articles
  1. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  2. Investing

    What’s Plaguing Twitter and Yelp?

    Yelp and Twitter have recently become grounded in reality and unable to justify their sky-high stock valuations.
  3. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  4. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  7. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  8. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  9. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  10. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!