UPDATE 5-Medivation, Pfizer Alzheimer's drug fails study

Wed Mar 3, 2010 1:47pm EST

* Phase 3 study did not meet main or secondary goals

* Results on Dimebon drug were highly anticipated

* Medivation shares plunge 67.2 percent

* Pfizer shares fall 1.4 percent (Adds Medivation CEO comments, advocacy group comments)

By Lewis Krauskopf

NEW YORK, March 3 (Reuters) - A closely watched experimental Alzheimer's drug from Medivation Inc (MDVN.O) and Pfizer Inc (PFE.N) failed to meet the main goals of a late-stage clinical trial, sending Medivation shares down 67 percent.

The clinical failure of the drug Dimebon is a blow to efforts to combat Alzheimer's disease, the memory-robbing degenerative condition that afflicts 26 million people globally. Current drugs, such as Pfizer's Aricept, have a minimal effect in improving symptoms.

Dimebon also did not meet its secondary efficacy goals in the 598-patient Phase 3 trial, known as Connection, whose results were released on Wednesday.

"The results were unexpected and we are disappointed, especially for all these patients with Alzheimer's and their caregivers," Medivation Chief Executive Officer David Hung said in an interview.

The results dealt a severe setback to Medivation and were a big disappointment for Pfizer, the world's largest drugmaker. Pfizer has made a big push to develop drugs for Alzheimer's disease.

Theories exist on how Alzheimer's disease develops, but the definitive cause remains elusive. It continues to be a hot area of research for drugmakers such as Pfizer and Eli Lilly (LLY.N) that can take high-risk, high-reward gambles.

While most other Alzheimer's drugs in late-stage research development focus on a protein known as amyloid, Dimebon had seemed to work in Alzheimer's patients by preventing damage to mitochondria, tiny units of cells that supply energy, Medivation previously said.

"We all felt it was very promising," said Maria Carrillo, director of medical and scientific relations at the Alzheimer's Association, which provides grants for early-stage research.

"We were very interested in that mechanism of action and hopeful that that could lead to other avenues of research, and we think that perhaps it still can," she said.

Pfizer, whose shares fell 1.4 percent, said it was evaluating the data to determine next steps for the development of Dimebon, which was found to be well tolerated in a separate late-stage study designed to look at safety.

A smaller earlier trial had generated excitement about Dimebon, also known as latrepirdine, because it strongly suggested the medicine can improve memory and functioning among patients with mild to moderate Alzheimer's disease.

Consensus analyst forecasts for Dimebon had been that it would reach $600 million in sales by 2014, according to Thomson Reuters, with many on Wall Street predicting it could be an eventual blockbuster should it have worked.

But the drug has generated controversy because it had only been tested in Russia and because there is uncertainty about how Dimebon works in Alzheimer's patients. The drug was first sold in Russia as an antihistamine.

About 15 percent of Medivation's shares outstanding were held as short interest as of Feb. 12, representing bearish bets against the company.

Among the financial losers on Wednesday was Medivation CEO Hung, who held about 4 percent of the company's outstanding shares, according to Thomson Reuters.

The main goals of the Connection trial, which enrolled patients with mild to moderate forms of Alzheimer's, were improvement in cognition and function.

Patients either got 20 milligrams of Dimebon, five milligrams or a placebo. Each group took the pills three times a day for six months. No statistically significant improvements were seen for the 20-milligram group for either main goal.

Hung said the companies were surprised at how well some of the patients did on the placebo, which may have contributed to the study failing to meet its goals.

He said it was too early to speculate whether the companies would end development of Dimebon, for which several other late-stage studies have been ongoing.

"Given these data we have to re-evaluate the whole program, and we are doing that," Hung said.

Medivation also has been developing Dimebon for Huntington's disease, a hereditary disease that causes loss of brain cells and mental deterioration, but the results of Connection significantly decrease the chances the drug will work in Huntington's, said JPMorgan analyst Geoff Meacham.

A share price in "the mid-teens" is now justified for Medivation, Meacham said in a research note, because of another experimental drug the company has in late-stage development for prostate cancer and because of its cash.

The Dimebon failure increases Pfizer's dependence on cost-cutting from its Wyeth acquisition to shore up profits as it faces looming generic competition to its Lipitor cholesterol drug, BMO Capital Markets analyst Robert Hazlett said in a research note.

Shares in Ireland's Elan ELN.I, which has an interest in rival Alzheimer's drug bapineuzumab, rose 2.2 percent. Bapineuzumab is being developed by Pfizer and a Johnson & Johnson (JNJ.N) subsidiary, Janssen Alzheimer Immunotherapy, in which Elan has a 49.9 percent stake.

Medivation shares fell $27.04 to $13.21 in afternoon trading on Nasdaq. Pfizer shares fell 24 cents to $17.36 on the New York Stock Exchange. (Reporting by Lewis Krauskopf; additional reporting by Ben Hirschler in London; Editing by Lisa Von Ahn, Maureen Bavdek, Dave Zimmerman and Robert MacMillan)

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