BioWorld Today Contributing Writer

Active Biotech AB stock plunged 53.5 percent and partner Teva Pharmaceutical Industries Ltd.'s shares took a 6.2 percent hit Monday following their announcement that oral multiple sclerosis (MS) drug laquinimod did not achieve its primary endpoint of reducing the annualized relapse rate (ARR) in the Phase III Bravo trial.

Teva said the result stemmed from a statistical imbalance and said it plans to move ahead with regulatory applications in the U.S. and EU. However, several analysts viewed the results as a setback for Teva, of Jerusalem, and Active, of Lund, Sweden, and a boost for competitor BG-12 (dimethyl fumarate) from Biogen Idec Inc., of Weston, Mass.

Teva shares (NASDAQ:TEVA) were down $2.88 to close at $43.76 Monday, while Active Biotech stock (Stockholm:ACTI) fell $4.68 to $4.06.

The laquinimod results are the latest episode in the intense competition to develop next-generation oral alternatives to current injectable MS blockbusters such as Avonex (interferon beta-1a, Biogen Idec), Betaseron (beta interferon 1b, Bayer AG), Copaxone (glatiramer acetate, Teva), Rebif (beta interferon 1a, Merck Serono) and Tysabri (natalizumab, Biogen and Elan Corp. plc).

Novartis AG's Gilenya (fingolimod) gained FDA approval last fall and European approval earlier this year generated first-quarter 2011 sales of $59 million. In pursuit along with laquinimod are Sanofi SA's teriflunomide – which showed a 31 percent reduction in annualized relapse rates in a Phase III trial and has additional Phase III trials ongoing – and BG-12, which yielded better-than-expected top-line data in its first Phase III trial and has a second Phase III trial ongoing with a new drug application filing in the first half of 2012. In late June Merck Serono pulled the plug on its oral MS candidate cladribine rather than embark on a new clinical program as the FDA had requested. (See BioWorld Today, April 12, 2011, and June 23, 2011.)

Teva explained that results from the Bravo study, the second of two pivotal Phase III laquinimod studies, did not achieve the primary endpoint of reducing the annualized relapse rate (p = 0.075). The company said that while the randomization process for Bravo was adequate, placebo and treatment study groups showed dissimilarity in two baseline magnetic resonance imaging characteristics. Teva added that when the imbalance was corrected "according to a standard and pre-specified sensitivity analysis included within the original statistical analysis plan," laquinimod did better and demonstrated a significant reduction in the annualized relapse rate (21.3 percent, p = 0.026), in the risk of disability progression as measured by Expanded Disability Status Scale (EDSS) (33.5 percent, p = 0.044) and in brain volume loss (27.5 percent, p < 0.0001). Teva said that those Bravo findings are in line with the results of the first laquinimod Phase III trial, Allegro.

Bravo was a two-year, multinational, multicenter, randomized, double-blind, parallel-group, placebo-controlled study designed to evaluate the efficacy, safety and tolerability of a once-daily oral dose of 0.6 mg laquinimod compared to placebo and to provide a benefit-risk assessment comparing oral laquinimod and a reference arm of injectable Interferon beta-1a (Avonex). The study completed enrollment in June 2009 of more that 1,300 patients at 153 sites in the U.S., Europe, Russia, Israel and South Africa.

In a prepared statement, Teva's group vice president of global branded products, Yitzhak Peterburg, said the company was encouraged by the overall outcomes of the laquinimod Phase III program and planned to submit applications for regulatory approval in the U.S. and EU.

But several analysts viewed the results as a setback for laquinimod, with BG-12 the prime beneficiary.

"Drug Development 101," wrote Jefferies & Co. analyst Corey Davis. "If a trial misses its primary endpoint, it is a failure. Bravo did not reach statistical significance on the primary endpoint of annualized relapse rate reduction.

"Without two Phase III trials, we are now assuming laquinimod is not an approvable drug," Davis added. "In a different era where only the interferons and Copaxone were available, FDA might be more willing to bend the rules on this one. But with all of the progress on new MS drugs, we think the agency is more likely to stick to the rules requiring new drugs to have two positive Phase III studies."

Oppenheimer & Co.'s Bret Holley said the Bravo results strengthened BG-12's competitive profile.

"We believe Bravo results remove laquinimod as a significant competitive threat to BG-12, which we believe has a compelling clinical profile relative to other oral MS therapies," Holley wrote. "BG-12's 53 percent reduction in ARR appears notably better than laquinimod/teriflunomide and in line with Gilenya, based on cross-trial comparisons. Additionally, we believe BG-12 likely has a safety advantage vs. teriflunomide (teratogenic risk) and Gilenya (infection, cardiovascular risk, etc.)."

Piper Jaffray & Co. analyst Ian Somaiya said he believes the FDA might require Teva to redo the Bravo Phase III which could delay filing and launch by two years. "At a minimum, we believe that this result places Biogen BG-12 in a clear superior position among the potential oral MS therapies," he said. "Even with the baseline characteristics adjusted, laquinimod at best repeated its first Phase III trial results, which we believe are inferior to BG-12 results."

Shares in Biogen Idec (NASDAQ:BIIB) gained $1.03, to close at $102.90 Monday.