Cardiome whips out budget ax as Merck dumps oral heart drug pact

Cardiome's long-running roller coaster ride with its atrial fibrillation drug vernakalant went into a steep descent this morning when the biotech announced that Merck ($MRK) is dumping its involvement in the oral formulation of the therapy. Shares of Cardiome ($CRME) plunged about 40% on the news, which includes a plan to swiftly slash the biotech's burn rate in half.

Just last summer Merck buttoned up rights to the IV formulation of vernakalant, which gave analysts greater confidence in its collaboration with the pharma giant. Around the same time Merck completed multiple Phase I studies for the oral program, with an eye to launching a Phase II trial in 2012. But this morning, Cardiome lost a considerable amount of that confidence when it said that Merck had decided to cut its losses on the oral end of the deal after reviewing the regulatory environment and the timeline for an approval.

"It is our understanding that vernakalant oral has continued to have a safe and effective profile as demonstrated by studies conducted since the product was licensed to Merck. We are extremely disappointed with the decision Merck has made" said Cardiome CEO Doug Janzen. "However, we look forward to continuing to work with Merck on the worldwide development and commercialization of vernakalant IV."

Cardiome officials didn't immediately note just how they plan to cut costs in half, but its release noted a plan to trim down to $11 million a year, half of the current burn. The IV formulation of vernakalant is approved in Europe and has faced a rocky road at the FDA.

- here's the press release