Valentis Inc. missed its endpoint in a Phase II study of its lead product, Deltavasc, and watched its stock plummet after reporting the news Wednesday. But the trial might have uncovered a product to replace Deltavasc at the top of Valentis' pipeline, which could allow for a regulatory filing along the same timeline.

Investors took little heed, though, as they sold off Valentis' stock (NASDAQ:VLTS), which fell 64.5 percent Wednesday, or $4.29, to close at $2.36. The stock was heavily traded, ending the day at a volume of about 9.7 million shares, about 59 times its average.

But it's well known that in order to succeed, sometimes you have to fail.

"Serendipity," said Valentis CEO, Chairman and President Benjamin McGraw in a conference call, "is the hallmark of this industry. The just-released results were unexpected and intriguing."

At first glance, those results are negative - a missed primary endpoint. Data showed that in the Phase II trial of Deltavasc vs. a control polymer (called PINC polymer) in patients with the intermittent claudication form of peripheral arterial disease, no difference was seen between the arms. The desired endpoint was improvement in exercise tolerance after 90 days.

But mining the data brought up something interesting - specifically, that both treatment arms were active, and that there was a statistically significant increase in exercise tolerance from baseline in both the Deltavasc group and the PINC polymer group. Also, both groups experienced a statistically significant improvement in ankle brachial index (ABI), which is an indicator of blood flow.

Explaining how those results occurred - and why they could be good news - requires a closer look at Deltavasc and PINC polymer. Deltavasc is a formulation of 5 percent solution of PINC polymer mixed with the Del-1 gene, thought to be an angiogenic agent. The control was simply a 5 percent solution of the PINC polymer, which is a non-ionic polyoxyethylene-polyoxypropylene block copolymer. PINC polymer has the chemical characteristics of components of cell membranes and was supposed to help uptake of the gene.

Knowing all that and looking at the data, Valentis, of Burlingame, Calif., realized that what was causing the benefit wasn't the Del-1 gene, but the PINC polymer itself - it just took until Phase II for that to become evident.

"We used the PINC polymer [as a control in the Phase II] to assure blinding," McGraw said. "It has the same viscosity and appearance as Deltavasc. We also believed it was important to test the true activity of the Del-1 gene."

He said that if the Phase II had tested against saline and results had shown a benefit for Deltavasc, if "someone had asked us - in Phase III or from the FDA - how do we know the benefit isn't from the polymer, we would not have known and would have had to do a trial to answer that question."

Now they've answered it.

The hard data show that at the 90-day assessment, the PINC polymer group of 51 patients had a significant increase in exercise tolerance from baseline of 34 percent (p<0.00001), and the Deltavasc group of 49 patients had a significant increase in exercise tolerance from baseline of 32 percent (p=0.0001).

In the PINC group, there was an increase in ABI of 0.059 (p=0.00072). For the group receiving PINC plus Del-1, there was an increase in ABI of 0.048 (p=0.00665).

The idea that both arms experienced high placebo rates is tossed aside by the ABI index increase - something not seen with placebo - as well as the statistically significant (p=0.039) correlation between ABI and peak walking time. Also, the improvement in exercise tolerance in both groups was just about identical and much higher than the 14 percent or less placebo effect observed in similarly designed trials.

Gene-Medicines Acquisition Pays Off

Valentis formally was called Megabios Corp., until it merged with Gene-Medicine Inc., of The Woodlands, Texas, in 1999, and changed its name. The PINC polymer comes from that merger and it mainly has been used as a delivery agent.

"The use of PINC polymer was discovered at Gene-Medicine," McGraw told BioWorld Today. "We acquired Gene-Medicine in 1999 - they had intellectual property, and now we have it, covering broadly the use of these polymers for delivering nucleic acids." He added that the company has filed for IP protection on an even broader group of polymers for the treatment of ischemia.

Moving PINC polymer to its lead product shakes things up for Valentis, but it laid out new tentative plans. The company will continue to pursue Deltavasc in an expected Phase I/II trial in an undisclosed noncardiovascular indication. PINC polymer now is the subject of sharper focus, and McGraw said "it is our intention to initiate one or more pivotal trials" of the product in peripheral arterial disease, comparing it to placebo. If all goes well, the company would have data available from a pivotal program in the first half of 2006.

The company had about $20.5 million in cash at the end of the second quarter. Joseph Markey, Valentis' senior director of finance, said it expects to end the third quarter with about $16 million in reserves. It spends about $1 million per month now, but given the new circumstances, "we'll have to go back and assess what an accurate burn rate will be going forward." But he said the company should have enough in the tank to get "well along the way" of the anticipated Phase III trial of PINC polymer.

Valentis owns the rights to PINC and will look to partner the drug. While nothing has been cleared by the board, John Reddington, the company's senior vice president, said it was "logical" that it would be partnered during the expected Phase III trial.

McGraw pointed out that, if things went as planned, a new drug application filing for PINC polymer would be "very similar to what the timeline of the filing of a [biologics license application] for Deltavasc would have been, which was 2008."

That had little impact on investors, though, as Valentis' stock fell early and stayed down. When asked if the market might have reacted harshly and missed the big picture, McGraw was clear.

"Yes, they missed it," he said. "We couldn't get people to read through the release. They'd read the headline [mentioning the missed endpoint] and call me. And we'd say, 'Read the entire release.'"