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Oncothyreon shares tank as drug misses study goal

The Associated Press

Shares of Oncothyreon shed more than half their value Wednesday after the drug developer said an experimental lung cancer treatment missed its main goal of improving overall survival in a late-stage study.

THE SPARK: The Seattle company said Stimuvax, which is labeled L-BLP25, was tested in patients with an advanced form of non-small cell lung cancer. The study involved more than 1,500 patients in 33 countries.

Oncothyreon said researchers saw "notable treatment effects" in some subgroups of the study, and it will conduct more analysis on that, but the company did not offer details. CEO Robert Kirkman said that the results were disappointing, and he noted the drug has been under development for more than a decade.

The company said results will be discussed with outside experts and regulators in the coming months. Oncothyreon licensed the experimental drug to a division of the German company Merck KGaA, which conducted the study.

THE BIG PICTURE: Stimuvax is designed to work by stimulating the body's immune system so that it can identify and destroy cancer cells. It is the most advanced drug in Oncothyreon Inc.'s pipeline of products under development, according to the company's website. It has no products on the market.

THE ANALYSIS: WBB Securities analyst Steve Brozak said Merck should offer more details about the results. He also said investors should realize that science can get messy, and companies can discover breakthroughs when they dig deeper into the data and analyze subgroups like the ones Oncothyreon mentioned. He has a "Hold" rating on the shares.

"The transparency that takes place around this development is more important than the announcement," he said. "How they understand what just took place means much, much more."

"This is the way science works, and this is the way health care works, and if we expect new drugs and if large (drugmakers expect) blockbusters, then they better begin to start understanding this because they don't."

He said he thinks the company's news hurt other biotech stocks Wednesday.

SHARE ACTION: Down 56 percent, or $2.53 to $1.97 in late morning trading. The share price started plunging before markets opened and hit a multiyear low of $1.71 before rallying.