A 14-year-old partial clinical hold on Gemphire’s lead — and only — drug just came back to bite the biotech today, and the stock market reaction quickly carved out half of its market cap in savage retribution.
Frequently overlooked in the roller coaster ride investors have had since the biotech went public two years ago, with plans to advance the old Pfizer drug for NASH and cardio purposes, the FDA clamped a partial clinical hold on the drug in 2004, preventing any studies using the drug in patients for more than 6 months because regulators determined that the therapy had potential toxicity issues linked with the PPAR drug class.
So the biotech ran two-year rat and mouse carcinogenicity studies with an eye to clearing the regulatory path. The problem is that they came back showing liver tumors in the animal models — which the biotech insists was completely normal and expected, likely limited to rodents.
Investors, though, weren’t nearly ready to accept that explanation or the delay in the company’s R&D plans. Gemphire shares $GEMP were blitzed, closing down 50% Tuesday afternoon.
Now the FDA wants a new toxicology study before it follows through with an end-of-Phase II meeting to talk about lifting that hold and late-stage studies. And that is throwing Gemphire’s timeline out of whack.
Jefferies sees a year-long delay for the expected Phase III, but also offered some support, noting:
These new data are expected in mid ’19, pushing out Ph. IIIs in dyslipidemia to H1’20. This request suggests FDA remains conservative on any drug with PPAR activity. If FDA had true concerns on GEM it likely would not have allowed the start of the Ph. II pediatric NAFLD study.
In the deal with Pfizer, Gemphire permitted a claw-back provision for the pharma giant. But Pfizer doesn’t look anxious to have it back, so the company is revamping its timeline with the biotech to give it an additional 3 years — in 2024 — to achieve a satisfactory commercial effort. And Silicon Valley Bank followed through with relaxed terms on debt.
The new study should be completed and ready for the FDA to look over in Q2 2019.
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