Avanir hits the skids after its pain drug flunks a mid-stage study

Avanir Pharmaceuticals ($AVNR) watched its shares tank more than 20% after its lead pain candidate failed to outdo a placebo in a Phase II study of patients with multiple sclerosis.

In a 209-patient trial, Avanir's AVP-923 charted reductions in neuropathic pain in line with previous studies, the company said, and the treatment led to statistically significant improvement over baseline levels for MS patients. Unfortunately, so did a fake drug, and, in a terse embrace of the obvious, Avanir stated it "believes that a higher than expected placebo response negatively impacted the study results."

Despite missing its primary efficacy endpoint, AVP-923 was generally safe and well tolerated, the company noted, but the mid-stage failure sent Avanir's shares down about 21% on Wednesday morning, falling as low as $3.37.

Now the company says it's going back to the drawing board with its plans to develop AVP-923 for neuropathic pain. The Phase II MS study was one of two prongs in Avanir's quest to get the drug approved for pain, coming alongside an ongoing Phase III trial on diabetics.

The drug combines dextromethorphan hydrobromide--which blunts NMDA receptors and spurs sigma-1 receptors--with quinidine sulfate, thrown in to enhance bioavailability. Beyond its pain program, Avanir is in the midst of Phase II trials to see whether the drug is safe and effective in treating agitation among Alzheimer's disease patients and dyskinesia in those with Parkinson's.

Before Wednesday's setback, Avanir's shares had climbed about 53% since the start of the year, peaking in September on news that the company had settled a patent spat with Actavis ($ACT) over its banner on-the-market drug, Nuedexta. Under the settlement, Avanir will keep exclusive rights to the pseudobulbar affect treatment into 2026, and regulators are expected to finalize those terms early next year.

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