European regulators are likely to rescind the conditional approval of Endocyte's (ECYT) - Get Report ovarian cancer drug Vynfinit following the failure of a phase III study. Endocyte shares are sliding 61% to $6.74 in early Friday trading.

Following an interim analysis, independent monitors recommended halting early a phase III study of Vynfinit in advanced ovarian cancer. The interim analysis determined treatment with Vynfinit did not improve progression-free survival (PFS) compared to a placebo.

In March, European regulators granted conditional approval to Vynfinit for ovarian cancer based on data from a prior, phase II study. That conditional approval has now been called into question given the failure of Vynfinit in the larger and more definitive phase III study, Endocyte executives acknowledged on a conference call with investors Friday morning. The company has not yet spoken with European regulators so no formal decision has been made. 

The failure of Vynfinit also calls into question the future of the drug in other cancer indications. Merck (MRK) - Get Report has an option to fund a phase III study of Vynfinit in lung cancer following results from a phase II study also announced in March. Merck has not yet committed to pursuing future clinicial trials of Vynfinit.

Vynfinit consists of a folate (vitamin B9) linked to the chemotherapy drug vinblastine. The drug is "targeted" -- meaning it binds to folate receptors on cancer cells and delivers its chemotherapy payload while leaving normal cells intact. Patients must have cancer which over-expresses folate receptors in order to benefit from Vynfinit, so doctors use a companion diagnostic test to find eligible patients.

If Vynfinit is put on the shelf permanently, Endocyte will fall back on a pipeline of other cancer drugs, although all are in earlier stages of clinical development. 

The Endocyte bear thesis, which appeared to be a loser last month, has now been proven to be much more accurate. 

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;

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