Updated from 9:37 am EST with analyst comments defending Axovant.
The disclosure Tuesday that Pfizer (PFE) shelved an Alzheimer's drug candidate because of disappointing efficacy is having a negative impact on the market value of Axovant Sciences (AXON) , which is developing a similar Alzheimer's drug.
In an update to its drug research pipeline, Pfizer said a mid-stage study of Alzheimer's drug candidate PF-05212377 was terminated on Oct. 23 after independent data monitors determined the drug would not demonstrate a benefit in patients with mild to moderate Alzheimer's.
The Pfizer drug was designed to target a receptor in the brain known as 5HT6.
Axovant is also developing an Alzheimer's drug, RVT-101, which targets the same 5HT6 receptor.
Shares of Axovant fell 24% to $12.69 Tuesday as investors viewed the Pfizer setback as a new risk to the RVT-101 clinical program.
Axovant is currently conducting a phase III study of RVT-101 in patients with mild to moderate Alzheimer's. Results from the study are not expected until the second half of 2017.
The Danish drug company Lundbeck is developing its own 5HT6-targeted drug, which is now in a phase III study with results expected in early 2017.
The Pfizer phase II study was designed to determine if PF-05212377, taken for 12 weeks, could improve the cognition and memory of mild to moderate Alzheimer's patients who were still experiencing symptoms while on a stable dose of Aricept. An interim analysis, conducted in October, determined the futility of PF-05212377. Pfizer disclosed the study's failure on Tuesday in conjunction with reporting of 2015 earnings.
The Axovant phase III study employs a similar design, with mild to moderate patients taking RVT-101 or a placebo on top of a stable dose of Aricept. The study treats patients for six months.
RV-101 is a cast-off Alzheimer's drug abandoned by GlaxoSmithKline (GSK) which Axovant CEO Vivek Ramaswamy acquired for $5 million, plus the promise of sales royalties, if ever approved. Axovant went public last year at the height of the biotech bubble, which sent the company's market value surging to almost $3 billion. Since then, Axovant shares have lost more than half their value. The stock now trades below its $15 IPO price.
Update: Evercore ISI analyst Mark Schoenebaum defended Axovant in an email sent to investor clients, based on his conversation with Axovant. According to Schoenebaum, Axovant believes RVT-101 is more potent against the 5HT6 receptor compared to the Pfizer drug. The ongoing RVT-101 phase III study is also enrolling a less advanced Alzheimer patient population and is treating patients for a longer period of time compared to the Pfizer study.