NEWTON, Mass. (


) --Shares of

Novelos Therapeutics


sank more than 80% Wednesday after the company announced the failure of a late-stage lung cancer drug study.

Patients with non-small cell lung cancer who were treated with Novelos' experimental drug NOV-002 in combination with first-line chemotherapy did not live longer than similar patients treated with chemotherapy alone, according to results from a phase III study disclosed by Novelos.

Novelos shares plunged $1.34, or 82%, to 30 cents in early Wednesday trading.

"We are very disappointed that our pivotal Phase 3 lung cancer trial did not meet the primary survival endpoint," said Harry Palmin, Novelos' CEO, in a statement. "In retrospect, it appears our simulations were inaccurate due to trial data deviating from our statistical model, the impact of censoring patterns, and control arm survival exceeding our expectations based on historical precedents."

That's an interesting concession for Palmin to make now because last December, he was claiming that the

NOV-002 study took longer to complete

than expected. This suggested to him that patients treated with NOV-002 were living longer and that the study would be a success.

In fact, it seems as if the control-arm patients in the study lived longer than Novelos expected. That's always a huge risk for any cancer study using overall survival as a primary endpoint, and it was a big reason why

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I cautioned investors in January against buying into Novelos

based on Palmin's exhortations.

The case for NOV-002 wasn't helped either by the thin and not-entirely-convincing

phase II data

generated by phase II studies conducted in Russia.

Novelos didn't provide detailed data from the failed NOV-002 study, but said results will be presented later this year at a medical meeting.

-- Reported by Adam Feuerstein in Boston.

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