After you've covered the biotech business for a few years, it's hard to be surprised by anything. Yesterday was an exception to the rule.
If there was ever a sure thing in the clinic right now, it certainly seemed like Chelsea Therapeutics' development program for the hypotension drug Droxidopa fit the bill. The drug had been tested and approved in Japan and on the market for more than a decade. It has demonstrated a clear superiority over standard of care, proving itself more beneficial to patients largely without the severe side effects. And after pouring over the mid-stage data approvingly, analysts didn't appear to be heading out onto a limb when several confidently predicted that Chelsea was on a straight, low-risk path to an approval.
Roth Capital Partners analyst Andrew Vaino told Reuters that "the side effect profile for Droxidopa is far superior to midodrine, and it is also more effective. From a safety point of view this is about as clean a drug as you can get."
He put a $7 price target on the biotech's stock.
Then, bang! Droxidopa failed the primary endpoint in the first of two Phase III trials. The stock price, which had been pumped up over the past six months, deflated like a beach ball hit with a Bowie knife. It wasn't pretty.
Chelsea's CEO, Simon Pedder, tried hard to rally investors around a set of promising secondary endpoints, but that strategy almost never works to calm the market. If a developer can't get the primary right, investors are apt to hit the panic button. By the end of the day, the share price had crash-dived 61 percent.
Chelsea will have a better chance of convincing the market that the drug is bound for an approval when it unblinds data from another late-stage trial.
It seems clear from the first set of data, though, that an unexpected placebo effect played a significant role in scuttling Chelsea's shot at hitting the primary endpoint. Writing in Wired, Steve Silberman recently laid out a compelling case that the drug industry is faced with a growing challenge in beating the placebo effect. Marketers have known for years how to burnish the placebo effect of real drugs in their advertising campaigns. And studies have demonstrated that a doctor's bedside manner can heighten the perceived effect. Even the color of the pill can heighten a response. If the patient believes in the drug, then it's much more likely to work, even if the active ingredient is sugar.
It's impossible for me to say where Chelsea fits into Silberman's outline, if it fits at all. That's something for researchers to analyze and ponder. But the developer's experience highlights the increasingly tricky process of pushing drugs through clinical trials that compare them with a dummy drug. In a growing number of cases the dummy wins--even when the therapeutic is working exactly as expected.
There really never is a sure thing in biotech. And don't let anybody tell you differently. - John Carroll