Tranzyme Investors: Why Shares Just Got Halved

The excrement has hit the oscillating device for Tranzyme Pharma (Nasdaq: TZYM  ) , with the biotech cut in half today after ulimorelin didn't pass its phase 3 clinical trial. The problem may have stemmed from said excrement coming sooner than expected from the placebo group.

Tranzyme and partner Norgine were trying to show that ulimorelin could decrease the time to GI2, defined as the latter of first bowel movement or tolerance of solid food. Unfortunately, both doses given produced about the same results as a placebo, with which it took 80 hours to achieve GI2. Ulimorelin now joins Progenics Pharmaceuticals' (Nasdaq: PGNX  ) Relistor in the post-operative constipation-reliever graveyard. Relistor was able to gain approval as a treatment for constipation caused by opioid pain relievers, but because of different mechanisms, that isn't an option for ulimorelin.

Tranzyme had been expecting about 96 hours until GI2 for the placebo, suggesting that the norm has come down considerably since the company started the trial in 2010. Building off a shorter base makes it harder to show an effect.

The failure might seem like good news for Cubist Pharmaceuticals (Nasdaq: CBST  ) , which recently acquired Adolor Pharmaceuticals and its post-operative gastrointestinal recovery drug, Entereg, but the acquisition was more for Adolor's pipeline than for Entereg, which has never been a very big seller. In fact, GlaxoSmithKline (NYSE: GSK  ) had partnered with Adolor, but handed back the rights to the drug, presumably because $25 million in annual sales wasn't worth the big pharma's time.

Tranzyme and Norgine still have one more phase 3 trial for ulimorelin that will read out by the end of June, but all a positive trial will do is put the companies in a pickle: One positive trial wouldn't be enough to gain FDA approval, and there's no guarantee that a third trial would come out positive. Unless the companies can find something that clearly explains a difference, I'd expect them to drop development of ulimorelin even if the second trial comes up positive.

That leaves Tranzyme focused on TZP-102, which you can guess by the code name isn't very far along in the clinic. The biotech hopes to read out a trial testing TZP-102 in diabetic gastroparesis by the end of the year. Let's just hope the placebo effect doesn't devour TZP-102 and digest it too quickly.

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Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of GlaxoSmithKline. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On March 12, 2012, at 8:50 PM, shalafarky wrote:

    GSK did not "hand back" Entereg to Adolor - while $25M might not have been enough revenue for GSK, it kept them relevant in the hospital market while their other hospital products came off patent, and it took Adolor's cash to make them walk away. Under the terms of the agreement, Adolor agreed to pay to GSK $25M cash, staged over a six-year period, with $2.5 million payable in 2011, tiered, mid-single digit royalties on annual net sales and a further one-time, sales-related milestone of $15 million.

  • Report this Comment On April 03, 2012, at 4:44 PM, portefeuille wrote:

    latter -> later

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