Smith & Nephew hit by setback as PhIII regenerative med study flops

Last spring a prominent analyst suggested that a successful late-stage study for Smith & Nephew's ($SNN) spray-on cell therapy for wound healing could be a catalyst to break up the company a la Abbott ($ABT) and Baxter ($BAX). But today, the discussion of the much buzzed-about trigger event turned bitter after the company reported that the Phase III trial flopped.

Buoyed by a successful mid-stage study, investigators for Smith & Nephew had high hopes for HP802-247, a living cell regenerative medicine treatment designed to resolve leg ulcers resistant to modern treatment methods. The treatment is an allogenic--or off-the-shelf--"bio-formulation of irradiated keratinocytes and fibroblasts in a human fibrin suspension."

In a short statement, though, the London-based company--best known for its joint replacements--reported that the treatment had failed to hit the primary endpoint, without providing the actual data for 12-week wound closures. A second Phase III trial for the therapy is now underway and is expected to read out in 2016.

Smith & Nephew was looking to diversify its product base when it snagged this treatment in a $782 million buyout of Fort Worth-based Healthpoint Biotherapeutics in 2012.

Back in March, Investec's Nicholas Keher triggered a significant amount of market scuttlebutt when he suggested that a successful outcome would set the stage for a breakup, with the wound healing division being spun out into a separate company, alongside endoscopy and orthopedics. But the cloud now hovering over HP802-247 will likely temper any new discussions about a breakup--as well as an oft-rumored sale of the company.

Investec downgraded the company's stock this morning.

"A thorough assessment is underway to determine why the preliminary results of the first Phase III study are inconsistent with the strongly positive Phase 2a/2b results," noted CEO Olivier Bohuon. "While this is an unexpected and disappointing development with this one product, we remain excited by the prospects for advanced wound bioactives as unique treatments for unmet patient needs."

- here's the release

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