An abrupt termination by Merck & Co. Inc. of development of oral vernakalant caught Cardiome Pharma Corp., of Vancouver, British Columbia, flatfooted as it prepared to release a financial update Monday.

The company scrambled to slash its cash burn guidance in half for 2012, cutting that number from about $29 million to $15 million annually going forward.

"As you can appreciate, we're stunned and very disappointed," said Doug G. Janzen, Cardiome's president and CEO.

Shares of Cardiome (NASDAQ:CRME) fell $1.05, or 54.4 percent, to close at 88 cents Monday, a crushing reversal of fortune compared to July 26, 2011, when Merck's acquisition of North American rights to vernakalant drove the company's stock up to $5.59. (See BioWorld Today, July 27, 2011.)

At that time, Merck's involvement was viewed as a vote of confidence in a drug that had suffered a major setback in 2010, when a clinical trial testing the intravenous version was suspended due to a case of cardiogenic shock at a South American clinical site. (See BioWorld Today, Oct. 22, 2010.)

Cardiome and its previous partner, Astellas Pharma Inc., began enrolling patients in ACT-5 (Atrial Arrhythmia Conversion Trial-5) in October 2009. That was to be a confirmatory Phase III trial of I.V. vernakalant (marketed in Europe under the trade name Brinavess) for rapid conversion of atrial fibrillation to sinus rhythm.

The trial would have enrolled up to 450 patients with atrial fibrillation of more than three hours duration, but less than seven days, excluding patients with congestive heart failure.

In previous studies, ACT-1 and ACT-3, I.V. vernakalant converted 52 percent of atrial fibrillation to normal heart rhythm, compared with 4 percent for placebo. The trial also was designed to evaluate the role of CYP2D6 genotype status on the pharmacokinetics and pharmacodynamics of vernakalant.

A data safety monitoring board reviewed the cardiogenic shock case, and recommended continuation of the trial. The patient went into cardiac arrest following vernakalant infusion and required resuscitation. Cardiome said the infusion could have unmasked an underlying cardiomyopathy, and that it would review the case and scrutinize the data to determine whether there was any pattern.

The FDA put the trial on hold, requesting full data from the site before it would give permission to continue. But the clinical hold was not expected to be so protracted.

Janzen said Merck met with the FDA and agreed to close and analyze the ACT-5 study, with results "sometime in Q2."

The drug has had a number of delays since an FDA advisory panel recommended approval in 2007. Merck's involvement in U.S. development of the drug was seen as a stabilizing influence on the fortunes of Cardiome and vernakalant. Merck had already acquired ex-North American rights in a deal worth up to $800 million. (See BioWorld Today, April 10, 2009.)

The expectation was that Whitehouse Station, N.J.-based Merck would resolve the clinical hold on I.V. vernakalant and advance oral vernakalant.

Merck carried out two Phase I trials to determine dosing for oral vernakalant. It reported that it had completed the second trial, a multiple-rising-dose Phase I study exploring higher doses of vernakalant, and the data showed the drug was well tolerated. Merck had plans to begin another Phase I study in 2011, and to use data from the Phase I trials to design a Phase II trial, expected to start in late 2012.

It is not yet clear whether Merck will be returning North American rights to oral vernakalant to Cardiome. "Merck has made the decision to discontinue the development program," Janzen said. "The asset is Merck's. Their decision is not to develop it."

The reason given for Merck's decision was that Merck saw risk in the regulatory environment and development timeline for oral vernakalant as a maintenance therapy for prevention of atrial fibrillation.

Oppenheimer's Bret Holley shared Merck's concerns about the regulatory climate for oral vernakalant. "We note oral competitor Multaq has faced mounting pressure from the FDA/EMA following safety signals in large clinical trials," he wrote.

Multaq (dronedarone) is being investigated by Sanofi SA for permanent atrial fibrillation. A review of the drug's risk evaluation and mitigation (REMS) strategy showed a risk of serious cardiovascular events, including death, when used in patients with atrial fibrillation.

The FDA began that review when the Phase IIIb PALLAS trial was halted in July after a data monitoring committee found a twofold increase in death, stroke and hospitalization for heart failure in patients receiving Multaq compared to placebo. (See BioWorld Today, July 25, 2011, and Dec. 22, 2011.)

Multaq is approved for reducing the risk of cardiovascular hospitalization in some patients with paroxysmal or persistent atrial fibrillation or atrial flutter. Paris-based Sanofi revised its label to stipulate that patients should receive heart rhythm monitoring every three months and appropriate antithrombotic therapy, and that it should not be prescribed for patients with permanent atrial fibrillation.

The deliberations around Multaq have significance for the use of vernakalant as maintenance therapy, and the increasing caution of the agency may signal that it is not as open to vernakalant as it was in 2007.

"The regulatory environment has shifted," Janzen acknowledged.

Even if the clinical hold is lifted on I.V. vernakalant, Oppenheimer's Holley noted, "it remains uncertain what will be required for FDA approval."

BMO Capital Markets Corp. downgraded Cardiome to "market perform," lowering its price target to 75 cents.

"We see limited downside risk below cash value at $1 per share; however, we see limited upside potential given discontinuation of oral vernakalant development, lack of progress toward a path forward for I.V. vernakalant in the U.S. and the apparent tougher regulatory environment following negative PALLAS study results for competitor Multaq," wrote BMO analyst Jim Birchenough.