FDA Has A Hold On Regulus' Hep C Ambitions

| About: Regulus Therapeutics (RGLS)

For companies like Regulus Therapeutics that have missed peak hepatitis C, the best hope is to find some underserved niche, such as the kidney failure patients who cannot take the Gilead (NASDAQ:GILD) pills Sovaldi or Harvoni.

Unfortunately for Regulus (NASDAQ:RGLS), that potential market now could be cut off as a clinical hold has been placed on RG-101 after a case of jaundice in a study enrolee who was receiving dialysis. Shares fell 48% to $2.59 in early trading today as the California-based group said it was awaiting instructions from the FDA on the necessary analysis that would be required before it can dose any more patients.

Twice shy

The patient in question was part of a phase I monotherapy study who had been given a single injection of the agent, which blocks viral replication through disruption of micro RNA, 117 days before being admitted to the hospital with jaundice.

Regulus' Chief Executive, Paul Grint, was quick to point out that in addition to kidney failure the patient had had multiple complications, including diabetes and heart disease, and was taking “a dozen concomitant medications”.

“This patient had significant medical conditions and on a dozen other drugs, three or four of which can be associated with hepatotoxicity,” he said in a call with analysts after the close of US markets yesterday.

This was similar to an earlier case of jaundice in a patient in a phase II trial of RG-101 in combination with Daklinza, which had been reported in interim data disclosed at the EASL meeting in April.

With a second case of liver injury, however, the FDA decided that a hold on new dosing is necessary. In the hope of calming investors, Mr. Grint said that since dosing was complete in all clinical trials this would not interfere with reporting data.

So far, the FDA has provided only a verbal notice that it will put a hold on RG-101. Until a written notice is provided, Mr. Grint said the group did not know what analysis would be necessary to get the program back on track.

Bad timing

News that new clinical work will need to wait comes just a week after Regulus secured a $30m debt arrangement to fund activities into 2018. It had a cash pile of $106m on March 31.

Two other factors are hitting Regulus’s sentiment. The hep C space is looking saturated with the entry of multiple new agents; analysts have trimmed by 25% the 2020 forecasts of Harvoni, the sector’s top seller, since Gilead reported that sales had not met analyst estimates earlier this year (Mature assets keep on giving – marketed upgrades and downgrades, February 8, 2016).

Second, biotech shares have generally been battered for 12 months now – Regulus peaked at more than $22 in late 2014, and since the Nasdaq Biotechnology Index’s top last July the stock has lost 75% of its value.

Its last real opportunity to raise money by selling stock was after the data provided at EASL, which drove shares above $8 for a week in April. Now it is looking like plans for a phase III trial in 2017 will be on hold. If Regulus does manage to get back on track it might have difficulty attracting a partner, which means that it needs to make every dollar count.

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