Metabasis Therapeutics ( MBRX) fell more than 50% Tuesday on disappointing data from its type 2 diabetes candidate and a parting of ways with Schering-Plough ( SGP) over hepatitis B treatment pradefovir.

The biopharmaceutical company said its phase IIb trial on CS-917 in patients with type 2 diabetes failed at its primary endpoint, significantly lowering a measure of glucose, in both doses tested.

"We are certainly disappointed with the CS-917 results, but we are hopeful that further review of the data will give us insight that will allow the continued development of this potentially important new approach for treating type 2 diabetes," said Metabasis CEO Paul Laikind, who noted in a conference call that the company has more questions than answers about the top-line results at this point.

"Although it certainly remains to be seen as we go through the data, I think most of the scientists who are familiar with the program here don't view this as a failed product," Laikind said, "They view this as a failed study."

The investigative drug is being developed by Daiichi Sankyo pursuant to a licensing agreement with Metabasis. The companies said they are continuing to evaluate the data and that fasting blood sugar levels of patients at the start of the phase IIb trials were considerably lower than those in the phase IIa trials, so they're exploring whether this may have impacted the results.

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