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Endocyte shares plunge 60 percent after drug trial is stopped

May 2, 2014

Endocyte Inc. stock plunged more than 60 percent Friday after the drug it’s developing with Merck & Co.’s backing failed to help patients in a trial for ovarian cancer.

The news could be particularly bad for the West Lafayette-based company, which has no other marketed products.

Editor's note: IBJ health care reporter J.K. Wall finds a silver lining for Endocyte in the timing of Friday's announcement, in his blog, The Dose.

The phase III study was stopped after an analysis showed that vintafolide didn’t demonstrate efficiency when treating patients with platinum-resistant ovarian cancer, the companies said in a statement Friday.

Endocyte shares fell $10.73 each by early afternoon, to $6.65 each, a decline of 61.8 percent. Shares in Merck, which has the rights to sell the medicine, dropped 2.1 percent, to $58.37.

Just over a month ago, Endocyte was being mentioned as a possible premium takeover target after it reported that vintafolide slowed the progression of lung cancer and won European backing to treat ovarian cancer.

"We were surprised and disappointed to learn of the independent Data Safety Monitoring Board recommendation to stop the Phase 3 [trial] in platinum-resistant ovarian cancer," Endocyte CEO Ron Ellis said in a prepared statement Friday. "We are reviewing and validating the data in collaboration with Merck in order to gain a better understanding of the interim trial results and make our formal decision regarding the execution of the trial."

Endocyte said it will continue to test vintafolide for lung cancer, with late-stage data possible toward the end of the year. The lung cancer indication is the more important one because that market is bigger, said Adnan Butt, an analyst with RBC Capital Markets.

“The stoppage was unexpected, mostly because previously both the non-small-cell lung cancer study and other studies that they’re running have run favorable data,” Butt said in a phone interview from San Francisco.

Until the lung cancer treatment data is released, Endocyte shares are “going to be overpenalized,” he said.

Endocyte management said on a conference call with analysts Friday that Whitehouse Station, N.J.-based Merck can drop its participation in the lung cancer study and will reach a decision when all data is viewed.

Endocyte has 70 employees in West Lafayette and 25 in Indianapolis. It has a small commercial team in an office on the northwest side of Indianapolis and had been hiring people in Europe to support the launch of vintafolide as a treatment for ovarian cancer, under the brand name Vynfinit.

While Merck was set to do the selling and marketing of vintafolide, Endocyte was going to handle sales of an imaging agent it developed to identify the patients most likely to benefit from the treatment.

An Endocyte spokeswoman declined to say whether Endocyte expects to trim its work force as a result of the setback with vintafolide.

Ellis noted that the company is well-capitalized to keep testing vintafolide in lung cancer and to continue research on its other drugs. A month ago, Endocyte completed a public stock offering—its third—that raised an additional $101.8 million.

“We are in a strong financial position to continue to advance our promising clinical programs,” Ellis said in a prepared statement Friday morning.

The additional funds added to the $131.5 million in cash Endocyte already had at the end of the first quarter. The company spent $20.4 million in the first quarter, with nearly $13 million going to research and development. Merck, however, reimbursed Endocyte for more than $3 million of those expenses.

Also on Friday, Endocyte reported a quarterly loss of $3.1 million, or 9 cents per share, compared to a loss of $3.9 million, or 11 cents per share, for the same period in 2013.

Revenue was $17.3 million for the first quarter of 2014 associated with the collaboration with Merck.

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