Axonyx Slammed on Drug Setback - TheStreet

Shares of



fell sharply on Monday, following mixed news relating to its experimental Alzheimer's Disease drug, Phenserine.

Axonyx said it halted enrollment in two late-stage clinical trials; but it also said it was continuing to enroll patients in another clinical trial based on interim, preliminary data.

The stock fell 43 cents, or 24.7%, to $1.31. At midday, volume was more than five times the average daily volume of about 1.6 million shares.

Axonyx has attracted Wall Street attention because Phenserine may be able to affect Alzheimer's Disease in two distinct ways.

In the first way, Phenserine acts similarly to several drugs on the market such as Reminyl from

Johnson & Johnson

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; Aricept from


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and Japan's


; and Exelon from


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Like these drugs, Phenserine is an AChE inhibitor, which prevents the breakdown of acetylcholine, a brain chemical that plays a key role in memory and other thinking functions. AChE inhibitors keep the levels of the chemical high even though cells assigned to making the chemical are being damaged or dying.

But Axonyx says its drug also can inhibit production of the beta-amyloid protein, which leads to the development of plaque in the brain. Scientists believe the plaque kills brain cells in Alzheimer's patients. If Axonyx can develop a drug to block the beta-amyloids from sticking to each other, it might be able to reduce or halt the development of plaque.

A Big Setback

Five weeks ago, the AChE approach suffered a major setback when a phase III clinical trial involving 375 patients showed no statistically significant improvement vs. placebo in patients with mild to moderate Alzheimer's Disease. Phase III is the last clinical trial stage before a company submits a drug application to the Food and Drug Administration. The announcement smashed the stock, which fell 63%.

On Friday night, prior to releasing data at a medical conference in Sorrento, Italy, Axonyx said it had halted enrollments in two other phase III tests examining the AChE effect.

Axonyx, which provided more details on February's failed phase III test, stopped the enrollments "to evaluate the planned Phenserine clinical development program," said Dr. Gosse Bruinsma, president and chief executive, in a prepared statement. Bruinsma took over as CEO on March 3, after Dr. Marvin Hausman relinquished the post. Hausman remains as chairman.

Bruinsma also said Axonyx would continue enrolling patients in the beta-amyloid approach to Alzheimer's Disease based on preliminary data from a phase II clinical trial. This test measured patients receiving 20 milligrams of the drug daily, patients receiving 30 milligrams daily and patients receiving placebo.

The preliminary results didn't achieve statistical significance among the three treatment groups. That's because this preliminary sample size was too small, Colin Neill, the chief financial officer, said Monday. He said Axonyx will proceed with the test comparing only the higher dose of Phenserine to placebo.

"While these results met the predefined criteria for continuing enrollment at the higher dose and we believe are encouraging, further data are required before definitive conclusions can be drawn," Bruinsma said Friday. The results covered 49 patients; Axonyx plans to enroll 150. Final results should be available by year-end.

"Although the reported trend appears positive, it's important to remember the results are very preliminary and the differences observed did not achieve statistical significance," said Matthew Kaplan, of Punk Ziegel & Co., in a Monday report to clients. "We are encouraged by the results but we await additional data confirming their clinical relevance."

Kaplan, who has a market perform rating on the stock, said Axonyx still has enough resources, including $85 million in cash, to keep operating "for the next two or three years." Kaplan doesn't own shares; his firm says it seeks to do business with companies mentioned in research reports.