MedImmune up on flu drug data; Merck stock off on Vioxx mistrial; Encysive falls on Myogen's gain

By Ronda Fears

Nashville, Dec. 12 - Citing a hung jury, the Houston judge overseeing Merck & Co., Inc.'s first federal trial over its painkiller Vioxx declared a mistrial on Monday, sending the major drug maker's stock plunging.

After trading as low as $27.99, Merck shares ended the day lower by 72 cents, or 2.47%, at $28.41.

The jury had been deliberating since Dec. 8, and reports by The Associated Press stated that a hearing to schedule a new trial has been slated next week. This was the first federal Vioxx case, but Merck has said in financial reports that there are 6,400 cases pending on the drug, which was taken off the market in September 2004 after a clinical study showed it raised the risk of heart attack or stroke in patients who took the drug for 18 months or longer.

The mistrial brings to question whether a new jury could hear allegations that Merck withheld information from the New England Journal of Medicine about a 2000 Vioxx study so the drug would appear safer. In the first Vioxx case, a Texas state jury slapped Merck with a $253 million verdict, which Merck is expected to appeal. In November jurors in New Jersey absolved Merck of liability, however.

AP reported that the federal judge has said he intends to meet with lawyers about the possibility of a global settlement.

In a release early Monday, Merck said it was disappointed by the decision and is prepared to face a retrial.

Merck 2013 bonds trade up

Merck's credit was weaker early Monday, along with the stock, after the prestigious New England Journal of Medicine in an article last week asserted that Merck withheld and even deleted significant data from a Vioxx study in November 2000 regarding the number of heart attacks in patients using Vioxx versus those using naproxen.

Early Monday, a sellside bond trader said the Merck 4.375% bonds due 2013 trading down by 2 points to 92.75. Later in the day, though, he said there was a "remarkable" rebound in the paper and he pegged the 2013 issue closing out the session at 96, which he said was up about 1.375 points from Friday's close.

GimmeCredit director of research Carol Levenson said in a report Monday that she was surprised by the market's mild reaction to the New England Journal of Medicine article and would expect to see additional downside in Merck paper.

"Intentional tampering with study data is a serious charge, and if Merck can't come up with a better explanation than it has, its credibility will be further besmirched and its legal battles will become even more difficult," Levenson said. "The [Vioxx lawsuit] numbers were growing at a good clip even before last week's events, and the less Merck is able to rely on its 'science,' the more vulnerable it appears."

Pain falls on dropping drug

Pain Therapeutics, Inc. shares declined by nearly 9% on Monday after the South San Francisco, Calif., drug maker said late Friday that it would discontinue further development in its drug for irritable bowel syndrome after disappointing results in a phase 3 study.

The stock dropped 64 cents, or 8.74%, to $6.68.

One trader said he thought the stock held up rather well against the news.

"I thought there would be more blood," the trader said. "Speculators were getting out of the stock this a.m. [so] buyers will be getting a $7.50 stock at a discount."

In a press release late Friday, Pain Therapeutics said the phase 3 study of its drug candidate PTI-901 for the treatment of irritable bowel syndrome did not meet its goal of demonstrating a meaningful benefit in the third month of treatment.

The company said it would abandon further study of the drug but would enter 2006 with two drug candidates in phase 3 clinical development and add to its pipeline applications for one or more less addictive painkillers.

Pain Therapeutics projected to have about $200 million of cash at the end of 2005 and said it expects a net cash burn rate of under $15 million in 2006.

MedImmune higher by 4.5%

MedImmune, Inc. shot up Monday after releasing preliminary data on its CAIV-T pivotal phase 3 trial, saying the influenza spray demonstrated clinical efficacy over the flu shot in head-to-head study.

While some sellside analysts remained skeptical, the stock gained $1.55, or 4.54%, to $35.71 and MedImmune debt also edged a bit higher. According to sources in the convertible market, the MedImmune 1% issue traded up about a quarter-point outright but barely budged on a hedged basis. The paper was seen moving at 97.75 with the stock at $34.25 and with a trade at 97.5 after closing Friday at 97 bid, 97.5 offered.

CAIV-T is a new version of MedImmune's spray vaccine FluMist, which is currently approved in children, aged 5 to 17, and adults. MedImmune said a phase 3 study of the vaccine showed that 3.9% of patients who took the vaccine came down with flu, compared with 8.6% of patients receiving conventional flu shots.

Merrill Lynch analyst Eric Ende said, however, in a report Monday that CAIV-T "remains a show me story" and he maintained a neutral rating on the stock. Ende said that while the efficacy data was solid several challenges remain, including potential difficulty to get a label for kids under two years of age and cost, which was a major marketing issue with FluMist previously.

A stock trader also noted that according to MedImmune, if the Food and Drug Administration approves this vaccine, sales won't rise until 2007. MedImmune plans to file for marketing approval for the vaccine in the second quarter of 2006 and will ask the FDA to give it a priority review.

Myogen up, Encysive off

Myogen, Inc. shares surged Monday after the Denver-based drug maker reported positive results for its developmental drug to treat high blood pressure in the pulmonary artery. On the news, Encysive Pharmaceuticals Inc., which is developing a competing drug for pulmonary arterial hypertension, took a dive.

Myogen zoomed upward by $7.80, or 40.48%, to $27.07.

Myogen said its Ambrisentan for pulmonary arterial hypertension met primary and secondary targets in a phase 3 study. The company said the trial met the primary efficacy endpoint of improved exercise capacity, its key secondary endpoint of time to clinical worsening, and other secondary efficacy goals.

Encysive, which last month announced that it had nearly doubled its workforce in preparation of taking its pulmonary arterial hypertension treatment Thelin into commercialization, took a huge hit from the news. The stock was off as much as 35% in pre-market trading but recouped some of that during the regular session, ending off by $3.69, or 33.01%, at $7.49.

Pulmonary arterial hypertension is the constriction of blood vessels in the lungs leading to extremely high pressure in the pulmonary artery, and making it difficult for the heart to pump blood through the lungs.

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