May 31, 2016 / 12:45 PM / 3 years ago

StemCells to wind down operations after ending mid-stage study

(Reuters) - StemCells Inc said it would wind down operations after the company terminated a mid-stage trial testing its therapy in spinal cord injury, sending its shares plummeting 85 percent.

The magnitude of the treatment’s effect did not justify continuing the study given the financial resources available, StemCells said on Tuesday.

The Newark, California-based biotech said it had cash and cash equivalents of about $5.5 million as of May 31.

The decision comes more than six months after StemCells said its spinal-cord injury therapy showed promising results, according to interim data from the mid-stage study.

The treatment, developed from tissues, improved the functioning and strength of limbs in patients with spinal cord injuries.

“In the end, a combination of the tough market environment and long clinical path ahead drove a financial/clinical failure,” Maxim Group analyst Jason Kolbert wrote in a note.

“We suspect there could be similar failures in other companies that lack a partner.”

StemCells also said it would lay off its 50 employees and record a one-time charge of about $1.25 million in the third quarter ending Sept 30.

The decision to end the trial followed an in-depth review of data and after obtaining concurrence of the study’s Interim Analysis Data Monitoring Committee, the company said.

StemCells said it will look to monetize its intellectual property, including data collected in its studies, as well as the transfer of its proprietary HuCNS-SC cells and other assets through a potential sale.

In 2011, erstwhile leader Geron Corp said it would pull the plug on its stem cell research and focus on its experimental cancer treatments.

Geron’s stem cell assets were eventually bought by BioTime Inc and are currently being tested in a clinical trial by subsidiary Asterias Biotherapeutics Inc.

Shares of StemCells, which had a market value of about $35.5 million as of Friday close, were down 81 percent at $57 in midday trading.

Up to Friday’s close, the stock had fallen about 40 percent this year.

Reporting by Amrutha Penumudi in Bengaluru; Editing by Sriraj Kalluvila

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