* Drisapersen given back after Phase III trial failure
* Marks termination of 2009 collaboration agreement
* Prosensa shares plunge 17.5 percent
LONDON, Jan 13 (Reuters) - GlaxoSmithKline has handed back rights to an experimental drug for Duchenne muscular dystrophy to U.S.-listed Dutch biotech firm Prosensa after it failed last year in a critical clinical trial.
Both companies said on Monday that Prosensa would now have full and unencumbered rights to drisapersen, as well as other compounds at an earlier stage of development. The move marks the termination of a 2009 collaboration deal between the two firms.
Hopes for the drug slumped last September when it did not show a statistically significant improvement in the distance that patients could walk in six minutes compared with a placebo in a final-stage Phase III test run by GSK.
Currently, there is no approved drug to alter the course of Duchenne muscular dystrophy (DMD) - a rare muscle-wasting genetic disease affecting boys that puts most of them in wheelchairs by the age of 12 and leads to early death.
Shares in Prosensa, which raised nearly $90 million in an initial public offering on Nasdaq in June, fell 17.5 percent to $4.63 on the news GSK had thrown in the towel. They were priced at $13 in the IPO and hit a high of $34.55 in August.
Despite the latest setback, Prosensa's chief executive Hans Schikan said he had not given up on drisapersen, adding the company was analysing results from various studies of the drug.
"Based on the data we've seen so far we feel it absolutely justifies a discussion with experts, with patient advocacy groups and most importantly with regulators to define what the next steps could be, including a potential regulatory path forward," he said in a telephone interview from the J.P. Morgan healthcare conference in San Francisco.
Schikan will present an update on the company's prospects at the meeting on Thursday, including a high-level update on various analyses that have been carried out so far.
He declined to specify the likely next step, but industry analysts at Leerink said the fact GSK had handed back rights suggested that pooling and sub-group analyses had failed to provide strong enough evidence to justify a filing for approval.
There had been speculation that younger DMD patients might benefit more from the drug or that combining results from different clinical trials might show a statistically significant drisapersen effect.
FUNDING UNTIL 2015
Leerink estimated that Prosensa ended 2013 with around $98 million in cash, which depending on its new development plans for drisapersen would likely be enough to fund operations into mid- or late-2015.
Last summer GSK and Prosensa had been seen as ahead of the pack in making a drug for DMD - a belief underscored by it having been awarded a "breakthrough therapy" designation by the U.S. Food and Drug Administration.
In the event, the key trial results in September dashed those hopes, dealing a major blow to Prosensa but causing relatively little damage at its much larger partner GSK.
Overall GSK's research laboratories have done well in the past 12 months, with new drug approvals in HIV, cancer and respiratory disease.
But Britain's biggest drugmaker has been less successful in higher risk areas. In addition to the DMD setback it has also reported disappointing results with a new kind of therapeutic cancer vaccine and a novel heart medicine.