UPDATE 3-Cell Genesys halts trial on higher deaths; shares sink

(Updates share movement)

By Varsha Tickoo

BANGALORE, Aug 27 (Reuters) - Cell Genesys Inc CEGE.O said it stopped a late-stage trial of its prostate cancer therapy, GVAX, after 20 more deaths were reported in patients on the drug versus those on a dummy treatment, and its shares crashed more than 75 percent to an all-time low.

The cause for the "imbalance in deaths" has not yet been identified, the biotechnology company said. An independent committee, which pointed out the death mismatch, reported no new safety issues for the therapy, it added.

"This is obviously a negative event for Cell Genesys and stock will take a big hit. We also believe that Dendreon (DNDN.O) will be negatively impacted based on how the two stocks have been linked to date," analyst Joe Pantginis from Canaccord Adams said.

Cell Genesys' rival Dendreon (DNDN.O) is developing a similar drug, Provenge, which has been mired in regulatory hurdles for years and has failed to show it significantly slowed the progress of advanced prostate cancer.

Both GVAX and Provenge are potential vaccines designed to stimulate the body's immune system to fight an existing cancer.

Dendreon shares were down 2 percent at $5.82 in morning trade on Nasdaq, after touching a low of $5.62 earlier.

Shares of South San Francisco, California-based Cell Genesys were trading down $2.04 at 76 cents. They earlier hit a life-low of 69 cents.

PARTNERSHIP EFFECT

Wednesday's development could slow the path to regulatory approval for GVAX, Cell Genesys's lead program.

"We are right now reviewing this disappointing development with our partner Takeda... We are reviewing all of our business operations with respect to any commensurate adjustments in the scope of those operations," the company said on a conference call with analysts.

Japan's Takeda Pharmaceutical Co Ltd (4502.T) had earlier this year entered into a development and marketing agreement with Cell Genesys for GVAX immunotherapy.

"We are currently notifying all participating clinical trial sites and regulatory agencies that enrollment of new patients into VITAL-2 has been suspended as has treatment with GVAX immunotherapy for prostate cancer of patients enrolled in the study," Cell Genesys CEO Stephen Sherwin said in a statement.

GVAX was being tested in two late-stage trials, coded VITAL-1 and VITAL-2, of which the second has now been scrapped.

The company said it has requested the independent committee to conduct a "futility analysis" on VITAL-1 and expects results from this in about a month.

VITAL-2 enrolled 408 patients and had 114 deaths -- 67 were in the treatment arm and 47 in the control arm.

GVAX was given along with French drugmaker Sanofi Aventis' (SASY.PA) cancer drug Taxotere to the treatment arm. The control arm received Taxotere with a steroid -- prednisone. (Editing by Himani Sarkar)