Chelsea and Catalyst Roll the Dice on Re-Analyses, Investors Take the Bet

Chelsea Therapeutics and Catalyst Pharmaceutical Partners both enjoyed nice stock bumps last week thanks to re-analyses of failed clinical trials, even though such analyses often prove to be nothing but trouble.

Chelsea’s orthostatic hypotension drug Droxidopa had failed a Phase III trial last month, but the company said new analyses showed significant improvements in secondary endpoints. Oppenheimer & Co. analyst Brian Abrahams warned that the lack of correlation to the primary endpoint “remains quizzical” and called the program “risky,” but investors still pushed the stock up 20 percent.

Meanwhile Catalyst said the recent Phase II failure of cocaine addiction drug CPP-109 may be due to poor patient compliance, since the drug apparently worked in a subset of compliant patients. The company decided it warrants further study, and the stock jumped 39 percent, conveniently allowing Catalyst to pursue a public offering.

Chelsea and Catalyst are by no means the only biotechs to dig glimmers of hope from the wreckage of failed trials: Just last month, Osiris Therapeutics pointed to good subset data when two Phase III trials of stem cell product Prochymal failed.

Nor are Chelsea and Catalyst the only ones whose investors bought into that hope: shares of Opexa Therapeutics soared 270 percent last month on a subset analysis from a failed Phase IIb trial with multiple sclerosis vaccine Tovaxin.

There are certainly times when a subset analysis, or retrospective analysis, or something else that looks like data dredging turns out to be exactly what a company needed to turn its next trial in the right direction. Like Human Genome Sciences, which succeeded in Phase III with lupus drug Benlysta (belimumab) thanks to learnings from a failed Phase II trial.

But how much of Benlysta’s success was luck? More often it seems that when a product fails to meet its primary endpoint, the product just doesn’t work, or at least no one can figure out how to prove that it works. The glimmers of hope turn out to be hype created by those who are drinking the Kool-Aid or sometimes even seeking to manipulate the stock. But maybe biotechs will be more cautious about promoting their re-analyses now that InterMune’s former CEO got 20 years in prison for playing up a retrospective subgroup analysis.

Dice photo by Flickr user ChiBart, CC.