Athersys tanks as its stem cell therapy flunks a Phase II stroke trial

Athersys' ($ATHX) in-development stem cell treatment failed to beat placebo in a Phase II trial on stroke patients, demolishing the company's value as management digs for a positive spin.

The company's treatment, called MultiStem, is meant to reverse the neurological damage caused by strokes, and Athersys recruited 140 patients to test whether the injection could make a meaningful difference on the Global Stroke Recovery Assessment scale. Looking at 90-day interim results, things aren't working out: MultiStem failed to chart any significant difference compared to placebo on the primary endpoint, the company said, and it failed secondary goals of improvement on two other measures of stroke rehabilitation.

The news sent Athersys' shares down by more than 50%, plunging the biotech into penny-stock territory as investors sprint from what looks like a valueless company. MultiStem is Athersys' only asset, and, after a major flop in inflammatory bowel disease last year, stroke was looking like its last chance to demonstrate efficacy.

But management, as ever, sees a silver lining in the latest Phase II failure. Dicing up the data after the fact, Athersys notes that patients who got MultiStem earlier in the treatment window did better against the study's endpoints than those who got it later. That group consists of only 27 out of the 65 who got the stem cell treatment, however, and even those results failed to meet statistical significance. But it's enough of a signal to keep the project alive, CEO Gil Van Bokkelen said.

"While the trial did not achieve the primary or component secondary endpoints, we believe the evidence indicating that patients who received MultiStem treatment early appeared to exhibit meaningfully better recovery is very important and promising," Van Bokkelen said in a statement. "... We anticipate additional data and information from the study and will conduct further analyses to generate more insight about the potential for MultiStem treatment in this area."

The results also deal a minor blow to Japanese drugmaker Chugai, which stepped in last month to buy the rights to MultiStem in its home country. Under the agreement. Chugai handed Athersys a $10 million up-front payment and promised up to $195 million more tied to development and sales milestones.

- read the statement