Intra-Cellular Therapies Future Uncertain Following Schizophrenia Drug Study Failure - TheStreet

The placebo effect can wreak havoc on clinical trials, particularly trials involving diseases of the brain. It was no surprise, then, to hear Intra-Cellular Therapies (ITCI) - Get Report on Wednesday night blame an "unusually high" patient response to a placebo as the reason for the failure of its experimental schizophrenia drug in a large phase III clinical trial.

In this case, the "placebo ate my clinical trial" excuse doesn't make sense, which places Intra-Cellular's plan to seek marketing approval for its schizophrenia drug in serious jeopardy.

Intra-Cellular shares fell 68% to $13.75 in Wednesday's after-hour trading session. The stock hasn't traded that low since September 2014.

In the phase III study, two different doses of the Intra-Cellular drug known as ITI-007 failed to reduce anti-psychotic symptoms in schizophrenia patients compared to a placebo. In fact, both doses of ITI-007 performed just a little bit worse than the placebo, based on the change in the Positive and Negative Syndrome Scale, or PANSS, a measurement of antipsychotic behavior in schizophrenia patients.

Intra-Cellular says ITI-007 improved the symptoms of schizophrenia in this study on par with previous studies of the drug. ITI-007's safety profile also looked clean. The current study failed because patients treated with a placebo improved much more than expected, preventing ITI-007 from demonstrating a benefit, the company said.

The problem with this explanation is that the study also included a fourth arm of schizophrenia patients treated with risperidone, an already approved and commonly used drug. Risperidone improved the symptoms of schizophrenia significantly better than ITI-007 and the placebo.

Blaming the high placebo response rate for ITI-007's failure falls flat since risperidone had no trouble beating the same placebo.

Wednesday's setback leaves Intra-Cellular in damage control mode. The company said it remains committed to moving forward with ITI-007 in schizophrenia but a timetable for an approval filing with the U.S. Food and Drug Administration was not provided.

If Intra-Cellular does push ahead with an FDA filing, it will rely on pooled and mixed data from two phase III studies. Results from the company's first phase III study, announced one year ago, showed a statistically significant improvement for a single dose of ITI-007 over placebo. The other dose failed. Combining those mixed data with the decidedly more negative results from the second phase III study creates a data package rife with regulatory risk.

And this assumes Intra-Cellular can actually file for approval. An equally likely scenario has FDA telling Intra-Cellular to conduct a third, phase III study to collect more data before submitting for marketing clearance. The company has enough cash -- $442 million at the end of the second quarter -- to pay for new clinical work but the delay and uncertainty are likely to keep a lid on the stock price.

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.