Myogen Plunges on Test Results

A small company with several heart drugs in late-stage clinical testingtook a big hit on Wall Street Friday after it said that a test forone product didn't meet its primary goal.

Denver-based Myogen's ( MYOG) stock dropped $5.46,or 34%, to $10.58. The stock fell as low as $9.70.

The news prompted Credit Suisse First Boston to cut its rating to neutral from outperform and Lazard Freres to downgrade the stock to hold from buy.

Myogen has attracted considerable investor attention in its short life as a public company. The stock has traded as high as $19.35 since thecompany went public at $14 a share in late October. Myogen sold five million shares in its IPO, and investor interest was strong enough that underwriters exercised their overallotment rights to sell another 750,000 shares.

But late Thursday, Myogen reported that a clinical trial of one drug -- enoximone -- had failed to meet its primary goal in the treatment of patients with severe congestive heart disease. The goal was to determine to what extent a seriously ill patient could be weaned from other intravenous heart medications to the enoximone capsule within 30 days. A positive result would have suggested that enoximone could provide an easier and less expensive way to administer heart medications.

However, the preliminary results of the 201-patient trial showed no statisticalsignificance between the drug and placebo rates.

But company executives said late Thursday -- and repeated in aconference call for analysts early Friday -- that other goals of thetest were met and that more crucial clinical tests evaluating thedrug are continuing. These two other tests are still enrolling patientsand should be completed by year-end.

Enoximone belongs to a category of medications called positiveinotropes. These drugs make the heart beat more strongly. Enoximonealso enables the expansion of blood vessel diameters, thus easing theflow of blood and reducing blood pressure.

When patients have severe congestive heart disease they arehospitalized, where they are given an assortment of strong positive introtrope drugs intravenously inan effort to reduce blood pressure and ease the heart's pumping burden.After these severely ill patients are stabilized and released from thehospital, however, the congestive heart failure re-emerges and patientsmust be rehospitalized. Eventually, Myogen points out, patients mustreceive intravenous drugs continuously or intermittently.

The preliminary results announced Thursday come from a test that "isnot a pivotal study" on enoximone, said the company's chairman, J. William Freytag, in Friday's discussion with analysts.

He said his researchers were surprised at the 51% weaning rate forpatients going from intravenous therapy to a placebo (vs. the 61% rate for those receiving the drug) in this phase III trial, the last step before a drug is submitted for approval to the Food and Drug Administration. He said this 51% rate was double that of placebo rates inearlier trials.

If the phase III rates had been similar to those of earlier tests, theresults most likely would have produced a statistically significantresult for the drug. Credit Suisse First Boston, for example,calculates that as few as four patients made the difference between astatistically significant result and a failure to meet the test goal. Freytag likened the enoximone results that didn't meet the company's goal to a "snapshot in time," whereas the results that achieved the goal were "like a moving picture."

Those successful results focused on how long a seriously ill heartpatient could keep taking enoximone before having to resumeintravenous therapy or dying. In this part of the test, enoximone patients were compared to patients receiving a placebo. Enoximone patients demonstrated statistically-significant better results than placebo patients when measured at 60 days, 75 days and 90 days.

Dr. Michael Bristow, the chief science and medical officer at Myogen, said these results indicate that enoximone can achieve its goal of extending the time that heart patients can delay in having to resume the more expensive intravenous therapy.

Although one part of the test failed, the other results caused Freytag to declare in a prepared statement Thursday, " I believe the objective of the study was achieved. ... I am also encouraged bythe safety results of this study."

Analysts say the real clincher for enoximone will be two other phaseIII tests assessing whether the addition of this drug to standardtherapy will reduce death and/or hospitalizations among severely illheart patients. These tests use the acronym ESSENTIAL and cover 1,800patients in North America, South America and Europe. The test whoseresults were released Thursday is called EMOTE.

Mark E. Augustine, of Credit Suisse First Boston, said the EMOTEresearch probably covers 100,000 end-stage heart failure patients inthe United States, whereas the ESSENTIAL tests could have an impact on30% of the 5 million U.S. heart patients.

"The implications of the EMOTE results for the ongoing ESSENTIALstudies are not entirely clear, but the results raise the risk ofESSENTIAL failure," Augustine said in a research report after the EMOTEresults were announced. (He doesn't own shares; his firm was co-lead manager of Myogen's IPO.)Augustine said that if enoximone succeeds, the company's stock couldsoar to $30 or more.

Analysts say Myogen may have an even better source of income in anotherexperimental drug called Ambrisentan, now in phase III testing forpulmonary arterial hypertension, a rare but fatal lung disease causedby abnormally high blood pressure in the arteries between the heart andlungs.

"We would view any material weakness" in the company's stock caused bythe EMOTE results "as a buying opportunity," said Maged S. Shenouda, aJP Morgan analyst, in a research note to clients. (Shenouda, whomaintained an overweight rating, doesn't own shares. JP Morgan is amarket maker in Myogen's shares and was a co-lead manager of Myogen'sIPO.)

Myogen will present updated results of its phase II test for the drugin May at a medical conference in Orlando, Fla. The company beganenrolling patients in January for its pivotal phase III tests.

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