UPDATE 3-BioMS drug fails mid-stage study, stock off 50 pct

(Adds details and background. Updates share price)

TORONTO, Jan 30 (Reuters) - BioMS Medical Corp (MS.TO) (MS.TO) on Friday said its lead drug for the treatment of multiple sclerosis failed to meet a main goal in a mid-stage study , sending the company's shares down more than 50 percent.

The small biotech said the study showed the drug did not prevent symptoms from coming back. People who took the drug were just as likely to have symptoms return after 15 months as patients who did not take it.

"We have long believed that the outcome of this study would be very uncertain, given that this trial was statistically underpowered and that the compound was not previously tested on humans for this indication," Maher Yaghi, an analyst at Desjardins Securities in Montreal, said in a research note.

Yaghi downgraded BioMS stock to "hold" from "buy" earlier this week in anticipation of the test results. However, he maintained his price target of C$5.75 a share.

The shares were down 34.4 percent at C$2.25 by afternoon, after touching a one-year low of C$1.51 earlier in the day.

The drug, which was being tested in patients with relapsing-remitting multiple sclerosis (RRMS) did, however, show signs of slowing down the progression of the crippling disease.

"The results are more positive than negative," said Douglas Loe, an analyst at Versant Partners. "The aspects by which the drug did perform well in this trial are those that which are germane to performance in its pivotal secondary progressive MS trial, which is a separate clinical program."

Loe said that program is seen as key to partner Eli Lilly (LLY.N), which signed a licensing and development deal with BioMS in 2007.

Multiple sclerosis, a condition in which the body's immune system attacks the protective cover of the nerves, is one of the leading causes of neurological disability in young adults.

BioMS said it will continue to analyze the results of the mid-stage trial.

Dirucotide is also being studied in two late-stage trials -- in the United States and across Europe and Canada -- as a treatment for secondary progressive multiple sclerosis (SPMS).

This, Yaghi said, is where the company might find more success.

"The firm may benefit from the drug's potential in SPMS, given that the Phase III studies in this indication are more powered to detect significance (vs the RRMS study) and, in our view, have higher odds of success."

The drug had received fast-track status from U.S. health regulators for the SPMS indication last September, a designation that is reserved for products intended to treat serious or life-threatening conditions with the potential to address unmet medical needs.

BioMS President and Chief Executive Kevin Giese shrugged off the stock performance on Friday.

"I think it is probably knee-jerk. People need to look at the data and see what it really says," Giese said. "Often, when people see the top headline that we failed to meet the primary end-point, they react to that without looking at what we were able to say.

Giese said the company and Lilly will continue to analyze the results of the trial, noting it should not affect its timetable for another trial in the second half of 2009, with an eye for approval in 2011 or 2012.

($1=$1.24 Canadian) (Reporting by Scott Anderson, additional reporting by Vidya L Nathan in Bangalore; editing by Rob Wilson)