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The good news is Medivation’s Alzheimer’s disease candidate, Dimebon (latrepirdine), appears to be a pretty safe drug; the bad news is it might not actually work in helping to treat this major degenerative disorder which affects 30 million people worldwide and whose treatment options remain limited.

Having just hit a record high of $40.25 yesterday, valuing the San Francisco company at $1.35bn, Medivation’s shares plunged 68% to $12.92 in early trading today, neatly illustrating the pitfalls of developing drugs for this largest of unmet medical needs. Investors are clearly prepared to place unrealistically large bets on promising Alzheimer’s candidates, leaving the relevant companies a hostage to the fortunes of their inherently risky projects. The big question now for Medivation, and its partner Pfizer (NYSE:PFE), is whether to hang on for further clinical trial results or consign Dimebon to the R&D scrapheap of Alzheimer’s candidates.

No connection

Results today from the first of four efficacy phase III trials, called Connection, which involved 595 patients with mild-to-moderate Alzheimer’s, showed that Dimebon failed to meet both its co-primary endpoints (ADAS-cog and CIBIC-plus) and its three secondary efficacy endpoints, compared to placebo.

The surprise to the company, and clearly its investors, is that these results failed to show any of the efficacy trends seen with Dimebon in a pivotal 183-patient Russian study, detailed in the Lancet in July 2008, which had raised hopes so high.

Naturally Medivation’s senior executives were keen to stress on a conference call today that they will leave no stone unturned in their analysis of the data from the Connection trial and to find out why it differs so much from the Russian study.

One key assessment will be a subset analysis to see if the drug actually worked for certain patients; the trial covered 63 sites across North America, Europe and Latin America, with a mean age of 74.4 years, and included a mixture of treatment-naïve patients and those previously treated with Aricept.

Elan (NYSE:ELN), a key developer of another Alzheimer’s candidate, bapineuzumab, justified the start of phase III trials on the basis of mixed phase II data and efficacy within a subset of patients not carrying the ApoE4 gene (Detailed bapineuzumab data bursts Elan's bubble, July 30, 2008). As yet it is unclear whether the Connection study included an assessment or analysis of potential biomarkers, the existence of which could help turn around Dimebon’s fortunes.

The only good news today was that a safety and tolerability study of 742 patients showed Dimebon to be well tolerated when given alone or in combination with a variety of current Alzheimer’s therapies, like cholinesterase inhibitors and memantine.

Still more shots on goal?

Even before the release of these Connection results, the company and its supporters stressed the drug has multiple shots on goal. Aside from the six-month Connection trial, a 12-month study (Concert) is ongoing, which given its longer treatment duration could help tease out efficacy in favor of Dimebon over Aricept alone.

However, results from Concert are not due until the end of 2011 or early 2012 and executives were cagey about the timelines for this trial, and two other six-month studies (Contact and Constellation), on the conference call.

A full analysis of the Connection data will no doubt help Medivation and Pfizer determine if it is worth continuing with these ongoing Alzheimer’s trials.

Dimebon is also being studied in a phase III trial (Horizon) for Huntington’s disease and hopes for success in this indication had also been high. If the companies decide to ditch Dimebon for Alzheimer’s, its prospects may revert to Huntington’s.

Given the spectacular fallout from Dimebon’s failure today, Medivation’s deal with Pfizer in 2008 which generated $225m upfront looks like a shrewd piece of business (Medivation hits jackpot with Pfizer deal, September 3, 2008), albeit of little consolation for investors who will be hurting today; apart, that is, from those who held a short interest in the stock, 16% of Medivation's shares.