May 6, 2010 / 7:40 AM / 9 years ago

UPDATE 2-Newron shares plummet 55 pct after drug setback

* Ralfinamide fails to show benefit compared with placebo

* Company working with external experts to assess data

* Newron has enough cash to reach beyond 2011

* Job cuts will be necessary

* Shares down 55 percent at all-time low

(Adds details, updates shares)

By Katie Reid

ZURICH, May 6 (Reuters) - Newron Pharmaceuticals’ (NWRN.S) neuropathic low back pain drug ralfinamide failed in a late-stage trial, sending shares in the Italian biotech company down 55 percent to an all-time low.

The drug did not show any significant benefit compared with a placebo, Swiss-listed Newron said on Thursday, adding it was working with external advisers to assess the data.

“We are extremely surprised and disappointed by the results, based on the statistically significant benefits shown in a Phase II placebo-controlled trial, as well as the results from a large number of preclinical studies,” Chief Executive Luca Benatti said in a statement.

Newron, which is now unlikely to find a partner for the compound, has enough cash and reserves to allow it to reach through to the filing of Parkinson’s disease treatment safinamide and beyond 2011, Newron spokesman Martin Meier-Pfister said.

The group is currently working with Merck KGaA’s (MRCG.DE) Serono unit to develop safinamide, which is in Phase III trials. Its filing is expected in 2011.

Vontobel said it was sticking to its buy case as the group has more clinical catalysts due at the end of this year and at the beginning of next.

“Phase III trials of Newron’s lead compound safinamide, partnered with Merck KGaA, are expected to read out,” Vontobel analyst Silvia Schanz said.

The ralfinamide setback meant that restructuring measures were needed and the necessary steps would be taken in the next few weeks, Meier-Pfister said.

“We will have to cut jobs, but it is too early to say how many,” he said.

Piper Jaffray analyst Sam Fazeli said the failure highlighted the risky nature of neuropathic pain drug development.

Analysts at Jefferies downgraded the shares to “hold” from “buy”, arguing that while safinamide underpinned the share price it was likely to remain undervalued by the market.

The stock traded down 55 percent, just off a record low of 8.60 Swiss francs by 1206 GMT. (Editing by Ben Hirschler)

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