Maxim Heading Toward Minimum After FDA Panel Rout - TheStreet

Maxim Pharmaceuticals

(MAXM)

was sent packing by a

Food and Drug Administration

panel Wednesday in a debacle its shareholders won't soon forget.

The San Diego biotech company sought approval for its drug Maxamine to be used for treating advanced skin cancer that has spread to the liver. But the FDA's

Oncology Drugs Advisory Committee

decided in rejecting the application that tests of the drug were flawed. Meanwhile, an analyst who was bullish on the stock until after

yesterday's plunge now says Maxamine's not likely to be approved for any cancer indication, a concession that could pressure the stock even further.

Shares of Maxim plunged 22% Wednesday, hitting $13.12, before a midday trading halt ahead of the committee's decision. The stock had plummeted 44% Tuesday after a posting on the FDA's Web site suggested the committee's decision would be negative.

Len Bias?

The committee made its decision after several FDA reviewers said the 300-patient trial failed to objectively assess Maxamine. The clinicians said the data appeared to be biased in favor of showing the benefit of the drug in patients who used the drug. They also said trial data didn't demonstrate that the drug was safe and said there was poor documentation of patient compliance.

"Imbalances

in the trial influenced the observed treatment effect" of the drug, said Donna Griebel, an FDA team leader who assessed the drug.

The panel findings weren't much of a surprise because the FDA yesterday posted its analysis of the Maxamine data on its Web site, as it is now required to do for all drugs. The analysis was heavily critical of the study's findings.

Company officials couldn't immediately be reached for comment.

Maxamine was tested in combination with cytotoxic drug interleukin-2 in advanced skin cancer in a 305-patient trial. The trial failed to satisfy its primary goal, which was to show that all patients in the Maximine-treated group survived longer. But the company presented data that showed that patients in the treated group whose cancer had spread to the liver survived longer than those on interleukin-2 alone.

The FDA panel rejected the subgroup analysis, saying such measures don't carry enough validity to approve a drug.

Ah, Credibility

Rob Toth, an analyst with

Prudential Vector

, says the panel's action dealt a severe blow to Maxim's credibility. Toth, who late Tuesday cut his rating on the stock to hold from strong buy, said the company had assured both PruVest analysts and investors at public forums that the FDA had agreed that the subgroup analysis was valid.

"This was the major down point of the study," says Toth. He said the setback could lead to "a loss of investor confidence" in company management.

Toth, whose bank raised money for Maxim in a recent public offering, acknowledges that he sustained some criticism among investors for not downgrading Maxim earlier Tuesday, when it began dropping preciptiously as investors absorbed the FDA Web site findings.

"I will take the criticism," says Toth. "We have to take the company's word for lots of things. The No. 1 problem was with the primary endpoint."

What's next for the company? Maxim has more than $190 million in cash -- perhaps $8-$9 a share, says Toth -- and is testing Maxamine in late-stage clinical trials for malignant melanoma, leukemia, hepatitis C and advanced renal cell carcinoma. But Toth says he doesn't expect the drug to be approved for any cancer indications, though it may come to market for other diseases. That likely means more ugliness ahead for Maxim shareholders, he says.