Onconova tanks as Baxter backs away from its oncology drug

Baxter ($BAX) is scaling back its support of Onconova's ($ONTX) lead candidate, nixing plans to pay for European trials and paring down the potential of what could have been a $565 million deal for the biotech.

The drug, rigosertib, is designed to treat myelodysplastic syndrome, a rare bone marrow disorder that often develops after cancer treatment. Baxter bought into the program in 2012, paying $50 million up front and promising up to $515 million more in exchange for the European rights to the drug. However, after a series of clinical setbacks, Baxter is now calling off its plans for new studies and an eventual regulatory submission for rigosertib in low-risk MDS, news that sent Onconova's shares down about 35%.

While Baxter's decision makes Onconova ineligible for some undisclosed milestone payments, the move doesn't affect the pair's European collaboration on rigosertib in high-risk forms of MDS or in pancreatic cancer, the biotech said.

Meanwhile, in the U.S., Onconova is working to pick up the pieces of a clinical trial failure that has severely dampened rigosertib's prospects.

Last year, the drug failed to achieve a statistically significant improvement in overall survival compared to standard care in high-risk MDS, but Onconova is planning to launch another Phase III trial targeting the subgroup of patients that responded well to the intravenous treatment, angling to make rigosertib a second-line therapy for those who fail on hypomethylating agents.

"There have been no drug approvals in the U.S. since 2005 to address the unmet medical need of these patients," CEO Ramesh Kumar said in a statement. "We remain committed to developing rigosertib IV to meet the needs of this underserved patient population."

First, Onconova will need the blessing of the FDA and the European Medicines Agency to get another pivotal trial rolling, and the company would have to secure what it calls "appropriate financing" to pay for the effort.

Leerink analyst Howard Liang, for one, is less than optimistic about Onconova's odds, pointing out in an investor note that "while there appears to be a signal in certain subgroups of the previous Phase III study in (high-risk MDS) setting, we are generally not a big fan of relying on subgroup analyses, especially in a possible scenario that the outlook of the entire company could be dependent on such an analysis."

- read the statement

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