Vical Inc said it would stop development of its most advanced drug, cancer therapy Allovectin, after a late-stage trial failed to show that the treatment was significantly better than chemotherapy, sending its share down 60 percent.
The 390-patient trial tested Allovectin for the treatment of advanced melanoma, the deadliest form of skin cancer.
"In the coming weeks, we will make the necessary changes to focus resources on our infectious disease vaccine programs and reduce expenses to conserve cash," Chief Executive Vijay Samant said in a statement on Monday.
Vical said Allovectin had failed to significantly reduce the size of tumors or increase the overall survival of patients, as compared to chemotherapy.
"We believe the results are clear and conclusive, with no margin for alternative interpretation," Samant said on a conference call with analysts. "Allovectin simply did not provide the expected benefits."
The study was designed with guidance from the U.S. Food and Drug Administration and was conducted mainly in the United States and Europe.
Cowen and Co analyst Eric Schmidt said shareholders would have been better served had the company analyzed the main and secondary goals separately and ended the trial 12 to 18 months ago, when data showing that the tumors did not shrink was first available.
San Diego, California-based Vical has several independent and collaborative programs for infectious disease vaccines.
The two independent vaccine programs - for herpes simplex virus (HSV) and cytomegalovirus (CMV) - have not entered clinical trials.
One of Vical's collaborations is with Japan's Astellas Pharma for a vaccine intended to control CMV in transplant recipients. Astellas company began a 500-patient late-stage trial in June.
Cowen's Schmidt said the trial had an unorthodox design with unnecessary developmental risk.
"We rate shares 'market perform', reflecting a lack of confidence in Vical's pipeline candidates and a frustration with the slow pace at which Vical's DNA-based gene delivery platform has advanced," he said in a note.
Vical had cash and investments of $70 million as of June 30, which it said would be adequate for its expected needs at least through the end of 2014.
The stock, which had risen more than 23 percent in the year to Friday's close, was down 60 percent at $1.43 in early trading on the Nasdaq.
(Reporting by Esha Dey and Pallavi Ail in Bangalore; Editing by Saumyadeb Chakrabarty and Ted Kerr)