Canadian drugmaker Neurochem (NRMX) will soon put the leading scientific theory behind Alzheimer's disease to a major clinical test.

The theory -- dubbed the "beta-amyloid hypothesis" -- says that Alzheimer's is caused by protein plaques that accumulate in the brain, damaging and eventually killing nerve cells. These plaques consist of sticky protein fragments called beta-amyloid.

If a drug could be found that stops or slows the formation of beta-amyloid plaques -- or even clears them from the brain -- it might halt or even reverse the loss of memory and cognitive function that is the devastating mark of Alzheimer's.

That drug would be a super-blockbuster, easily generating billions of dollars in sales.

Neurochem believes it has the drug that fits the bill. The company's Alzhemed is being tested in two large, phase III clinical trials. The first of these trials, conducted in North America enrolling 1,052 patients with mild to moderate Alzheimer's, is complete and data should be released around April or May. (Neurochem shares closed Friday down 11 cents to $17.76.)

At the recent JPMorgan Healthcare Conference, Neurochem CEO Francesco Bellini showed off some blinded data from the phase III trial that he said indicated Alzhemed was working as planned.

During a breakout session with investors, Bellini said there was a lot of interest from potential partners for Alzhemed and that a deal might easily be made even before the phase III clinical data is released. (His latter comment seemed as much a show of confidence in Alzhemed as it was a dare to short-sellers to remain exposed to the stock.)

Well, I don't share Bellini's confidence, and I don't think you should either. I'm a data guy -- I like to see solid and ample evidence of a drug's efficacy before drinking the Kool-Aid. With Alzhemed, I don't believe we have either.

Let's go back to the phase II study that Neurochem ran to justify advancing Alzhemed into its pivotal phase III program. Results from that study were published in November in the medical journal Neurology.

Phase II studies are typically small in size; in fact they're rarely big enough, but in this case, Neurochem enrolled just 58 Alzheimer's patients, randomized to doses of 100, 200 and 300 milligrams of Alzhemed and a placebo arm.

After three months of treatment, there was no difference in cognitive function, memory performance or any other efficacy measure between the Alzhemed and placebo patients. On the other hand, the drug's safety profile was clean, and tests showed that the drug was getting into the central nervous system of patients and was reducing the levels of a biomarker for the beta-amyloid protein.

To be fair, three months of treatment doesn't allow much time for any Alzheimer's drug to show a clinical benefit. So Neurochem extended the study. All patients, including those previously on placebo, were invited to participate in an open-label, single-arm extension study using the 300 mg dose.

Efficacy, defined as a change in cognitive function, was assessed again at various time intervals. Because all patients in this extension study were on Alzhemed, there was no real control arm for comparison. Therefore, Neurochem decided to make comparisons using previously published data from other Alzheimer's disease trials in 1994. Efficacy was measured using the ADAS-cog test, a 0-to-70 scale of cognitive function.

The chart below summarizes some of the data from the phase II trial. In this case, smaller changes in the ADAS-cog score compared to baseline represents better outcomes for patients.

Alzhemed Phase II Open Label Extension Study
Change in ADAS-cog Score from baseline
3 mos. 6 mos. 9 mos. 12 mos. 16 mos. 20 mos.
Sample Size (mild/moderate AD patients) 42 41 34 30 26 24
Mean change in ADAS-cog score 1.5 2.2 3.5 4.5 5.5 7.5
Historical control (1994 data) n/a n/a 5.0 7.2 9.6 11.9
Source: Company reports

At first glance, it looks good for Alzhemed. All the patients are losing cognitive function over time, but patients on Alzhemed are progressing at a slower rate. At 20 months, for example, Alzhemed patients had a 7.5-point worsening of their cognitive ability based on the change in their ADAS-cog score, compared with an 11.9-point increase in the historical control group. (Remember, the higher the number, the worse for the patients.)

But there are problems with this data.

The patient numbers are small; only 24 patients remained in the study at 20 months. This makes it hard to draw any good conclusions on Alzhemed's efficacy. The use of historical control data -- especially 12-year-old data -- also is dubious because Alzheimer's care has certainly improved since then.

But the biggest red flag, in my mind, is that these data are potentially biased because it excludes patients who were performing poorly on Alzhemed. Of the 42 patients who started the extension study, 18 -- or 43% -- had dropped out by 20 months.

But the dropped patients weren't included in the efficacy analysis. At least six of these dropped patients stopped taking Alzhemed because of "perceived lack of efficacy," according to the published report. Excluding these patients from the analysis likely makes Alzhemed appear more efficacious than it really is.

If it's hard to extract any confidence in Alzhemed from the phase II study, what about the ongoing phase III studies? Is there preliminary data there that might be used as a proxy to predict the study's final outcome?

Neurochem says such data do exist. The company has compiled blinded efficacy data combining patients on Alzhemed and placebo that it says point to an "encouraging trend" in favor of the drug,

The chart below is the data that Neurochem's Bellini showed investors at the JPMorgan conference. Like the chart above, smaller changes in the mean ADAS-cog score represent a slower loss of cognition and a better outcome for patients.

Blinded results from Phase III Alzhemed study
520 patients followed for 18 months
Mean change in ADAS-cog score from baseline
Blinded mild patients Blinded moderate patients
n=404 n=116
improved/stable 41% -1.6 17% -1.3
slow progression 23% 4.5 16% 4.4
progression 36% 13.8 66% 15.8
Source: Neurochem presentation Jan. 2007

The takeaway point, from Neurochem CEO Bellini's perspective, was that a majority of the blinded patients with mild Alzheimer's (41%) continue to show improved or stabilized cognition after 18 months of treatment with Alzhemed. Since this data is blinded, Neurochem doesn't know which patients are on Alzhemed and which are taking a placebo, but the overall favorable trend suggests that the drug is having some positive effect, he says.

Again, I believe this analysis falls short. From the above chart, it's possible to calculate the weighted average of the blinded results for the mild and moderate groups.

Mild patients 5.3 point progression
Moderate patients 10.91 point progression
Weighted average for total 6.6 point progression

Examined this way, it's hard to be as confident with Alzhemed's performance, because the drug's blinded performance (a 5.3-point worsening of cognition on the ADAS-cog scale for mild patients) is comparable to placebo patient data in other recently conducted Alzheimer's drug trials.

An analysis of these studies, done by Sprott Securities analyst David Dean, showed that Alzheimer's patients given a placebo show about a 6-point progression on their ADAS-cog score over 18 months. (Dean has a reduce rating on Neurochem and his firm has no banking ties to the company.)

In others words, based on the data available, it's not clear what level of effect, if any, Alzhemed is having on patients with Alzheimer's. This makes the pending release of results from the Alzhemed phase III study a very high-risk event.

Adam Feuerstein writes regularly for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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