Tranzyme slips further after lead drug failure

Tranzyme reaches new lows a day after its most advanced drug fails in a clinical trial

Associated Press

NEW YORK (AP) -- Shares of Tranzyme Inc. slumped to new lows Friday, a day after the company said its diabetic gastroparesis drug TZP-102 failed in a clinical trial.

THE SPARK: On Thursday, Tranzyme said once-per-day doses of TZP-102 did not work better than a placebo at treating the condition. Gastroparesis is a condition in which the stomach takes too long to clear out food. Tranzyme said it affects about 12 percent of people with diabetes, and causes nausea, vomiting, dehydration, and difficulty digesting food.

THE BIG PICTURE: TZP-102 is Tranzyme's most advanced drug candidate, and the company is conducting a separate trial where patients take the drug three times per day instead of one. However this is the second time in 2012 that the company's top experimental drug has failed in clinical testing. In March, Tranzyme said it was stopping research on a drug called ulimorelin.

The company is running other studies of TZP-102 as a treatment for other intestinal disorders and is studying another drug, TZP-201, as a treatment for diarrhea caused by chemotherapy.

THE ANALYSIS: Canaccord Genuity analyst Ritu Baral said ulimorelin and TZP-102 work in similar ways: they are designed to activate an amino acid that, among other things, increases movement in the gastrointestinal tract. Tranzyme is conducting preclinical studies of other drugs that target that amino acid, and Baral said she now has less confidence that they can treat gastrointestinal disorders.

Baral downgraded the stock to "Hold" from "Buy" and slashed her price target to $1.50 per share from $7 per share.

SHARE ACTION: The shares lost 13 cents, or 13.5 percent, to 82 cents Friday, after plunging 81 percent on Thursday. Friday's low point was 80 cents, less than half the stock's previous all-time low of $1.68.

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