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Value vaporization

Teva, Active Biotech shed billions in value as MS candidate misses endpoint

Investors slashed more than $3 billion off the combined market caps of partners Active Biotech AB (SSE:ACTI) and Teva Pharmaceutical Industries Ltd. (NASDAQ:TEVA) last week after laquinimod missed the primary endpoint in the Phase III BRAVO trial to treat relapsing-remitting multiple sclerosis (RRMS).

Teva fell $2.88 to $43.76 on Monday's news, for a drop in market cap of $2.6 billion. Active Biotech slid SEK42.15 (54%) to SEK36.60, a market cap loss of SEK2.9 billion ($462.5 million).

By week's end, Active Biotech was off SEK50.55 (64%) to SEK28.20, erasing $555 million in market cap, while Teva fell $5.92 (13%) to $40.72 to wipe out $5.3 billion in value.

Teva still plans regulatory submissions for laquinimod in the U.S. and EU, with a U.S. submission by early 2012. But investors weren't persuaded by a statistical adjustment of the BRAVO data to account for different baseline characteristics in the placebo and treatment groups. The adjustment, prespecified in the FDA-approved protocol, showed the trial met the primary endpoint.

The adjustment corrected for dissimilarities in two baseline MRI characteristics between the groups: the percent of patients with gadolinium-enhanced lesions and the volume of T2 lesions.

On the primary endpoint, the adjusted data showed laquinimod significantly reduced the annualized relapse rate (ARR) vs. placebo by 21.3%. It also showed a significant reduction of 33.5% in disability progression as measured by the Expanded Disability Status Scale (EDSS) and 27.5% in brain volume loss.

The corrected results were in line with data from the Phase III ALLEGRO trial in RRMS, which showed statistically significant reductions of 23% in ARR; 36% in disability progression as measured by the EDSS; and 33% in brain volume loss.

But investors had already been disappointed by ALLEGRO. In that study, the once-daily oral quinoline-3-carboxamide immunomodulator showed the smallest relative reductions

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