Phase III flop wipes 85% off the value of CytoTools

CytoTools (FRA:T5O) suffered the blackest of Black Fridays. While shoppers across the Atlantic were snapping up bargains, traders in Germany were responding to the failure of a Phase III diabetic foot ulcer trial by selling CytoTools shares at knockdown prices.

Darmstadt, Germany-based CytoTools lost 85% of its value in a single trading session. The collapse was triggered by the publication of data from a Phase III trial of DermaPro, a wound-healing product derived from dichloric acid. CytoTools enrolled 305 people with diabetic foot ulcers, across 7 countries, over a two-year period and treated them with either DermaPro or a saline solution, which acted as the control. After 12 weeks of therapy, CytoTools was unable to detect a statistically significant difference between the wound healing rates of the control and treatment arms.

The data contrast sharply to results generated in an earlier Phase III trial that was run to gain access to the Indian market. In the previous 300-person clinical trial, a 91% cure rate was reported among participants who received DermaPro. The data were strong enough for CytoTools' partner in India, Centaur Pharmaceuticals, to secure a recommendation for approval of DermaPro from authorities earlier this year. CytoTools' ambitions to repeat the success and bring DermaPro to market in Europe as a treatment for diabetic foot ulcers are now in tatters.

Management revealed the blow in a filing with the Frankfurt Stock Exchange. "We are very surprised by the results of this study," CytoTools CMO Markus Weissbach said in the statement. "Currently, it is inexplicable to us why the results are so much worse than that of previous studies." The challenge now is to make sense of the "inexplicable" result and assess whether DermaPro still has a future as a treatment for diabetic foot ulcers. Weissbach listed the 12-week treatment duration and the inclusion/exclusion criteria used for the wound sizes as possible factors in the failure.

CytoTools is open to running another Phase III trial if it can pin the blame for the flop on something other than the ineffectuality of the drug. And it still has a shot at developing DermaPro as a treatment for venous leg ulcers, an indication in which late-stage trials are gearing up on both sides of the Atlantic. Such long-term hopes carried little weight with investors on Friday, though. By the end of the rout, CytoTools had a market cap of €13 million ($14 million).

- read the statement (German)