The news this morning couldn’t have been worse for Endocyte Inc.
But if it had to come, the timing couldn’t have been better.
The West Lafayette-based drug development firm halted a large clinical trial of its leading cancer drug, vintafolide, for women with ovarian cancer. That sent its stock plunging more than 60 percent.
But the bad news on vintafolide didn’t come until AFTER the drug was given the green light for a market launch by the key regulatory panel in Europe on March 21.
And not until AFTER vintafolide showed promise as a lung cancer drug, also in late-March.
And not until AFTER Endocyte used the investor euphoria that followed those two positive announcements to raise an additional $101.8 million in an April stock offering.
So while CEO Ron Ellis, CFO Mike Sherman and the rest of the team at Endocyte must have felt sick to their stomachs when they read an independent statistical analysis that said vintafolide wasn’t working in ovarian cancer patients, they can at least feel good that the latest stock leaves them a $233 million pile of cash they can use to develop other drugs.
Since the company had a burn rate last year of $83 million (part of which was funded by Merck & Co. Inc., which has purchased the rights to vintafolide), that money should last a while.
Of course, they need it to, because bringing drugs to market is not a quick business. Endocyte was founded by Purdue University chemist Phillip Low in 1995—and it still has no drugs on the market.
And as Endocyte’s see-saw fortunes in just the past six weeks prove, drug development is a brutally risky business.
"Given the set-up, we see this as an overwhelmingly worst-case scenario," wrote Baird Equity Research analyst Christopher Raymond, in a note to investors Friday morning. He added, "We see a long road back to credibility."
Endocyte and Merck are still reviewing the data on vintafolide as an ovarian cancer treatment, so there’s an outside chance the drug might be resurrected in that therapeutic area. But it’s doubtful. The recommendation to halt the Phase 3 clinical trial came from the Data Safety Monitoring Board based on its analysis of progression-free survival in patients. If vintafolide isn’t helping cancer patients live cancer-free longer, then there’s little hope for it.
But vintafolide could still turn out to be effective as a lung cancer drug. And Merck would fund the development of vintafolide on that, too.
The truly worst-case scenario for Endocyte would be for Merck to pull out entirely. That would leave Endocyte with only drugs that are in Phase 1 clinical trials, and probably years to go before reaching the market.
But whatever happens, Endocyte will now spend its cash hoard on its other drugs in development. Those include EC1169, which could treat prostate cancer patients, and EC1456, which some have billed as a better version of vintafolide.
“We are in a strong financial position to continue to advance our promising clinical programs,” Ellis said in a press release this morning.