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La Jolla's Kidney Drug Is Statistical Noise but Stock Soars

SAN DIEGO (TheStreet) -- A few weeks ago, I called La Jolla Pharmaceuticals (LJPC - Get Report) a "hedge fund roach motel" and expressed doubts about the company's galectin inhibitor GCS-100, in part because the dodgy history of the drug and the target. 

Eh, I probably was too harsh with the "roach motel" line, but there are still a lot of unanswered questions about GCS-100 stemming from Monday night's release of results from a phase II study in chronic kidney disease patients.

La Jolla shares are up 74% to $18.97 Tuesday on what the La Jolla CEO George Tidmarsh described as "positive," "remarkable," "consistent," "predictable" and "important" GCS-100 data. That's a lot of adjectives! 

The phase II study enrolled 121 patients with chronic kidney disease and randomized them to placebo or two different doses of GCS-100: 1.5 mg or 30 mg. After 8 weeks of treatment, La Jolla says patients treated with 1.5 mg of GCS-100 demonstrated a statistically significant improvement in kidney function and reduced blood levels of galactin-3, the target of the drug. 

Victory declared.

What happened to patients treated with the higher 30 mg dose of GCS-100. Basically nothing. These patients had almost no change in kidney function and a large increase in blood levels of galectin-3. The low dose of GCS-100 works but the higher does was totally ineffective. That's called an inverse dose response and it's uncommon and strange. GCS-100 is designed to knock down the galactin-3 protein and thereby improve kidney function, but a high dose of the drug did exactly the opposite. 

These are what the primary endpoint data on GCS-100 look like graphed:

And these are the data on changes to galectin-3 levels.

La Jolla's Tidmarsh claims the high dose was never supposed to work because of a "rebound" or "biological feedback loop." 

Hmm. Okay, but what exactly is this "biological feedback loop" which causes a higher dose of GCS-100 to not work?

"We haven't gotten to the bottom of it yet... We are currently sorting that phenomenon out," said Tidmarsh on a conference call.

Here's a possible explanation: GCS-100 doesn't really work at all. This seems as plausible as La Jolla's claim that a really low dose of GCS-100 is effective but a higher dose is not.

One more interesting interpretation of the GCS-100 data to share. This is not from La Jolla but was produced by a helpful Twitter follower last night:

The vertical lines represent the standard deviation of the kidney function data released by La Jolla. The standard deviation measures the variability of data collected. A large standard deviation means there's more variability in the data collected i.e. more patients exhibiting extreme measurements further from the mean, or average. 

Look at the chart: The vertical lines represent the standard deviation for each group. When the standard deviations overlap greatly, as they do here between the placebo, GCS-100 1.5 mg and GCS-100 30 mg patients, it means a large percentage of these patients are all acting the same.

What La Jolla calls "positive" data on GCS-100 is really just statistical noise. 

But in a biotech stock bubble, investors don't really care about noise, as long as someone calls study results positive.

Follow Adam Feuerstein on Twitter.

Must Read: Biotech Stock Mailbag Extra: MannKind's Afrezza Panel Setup

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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