What happened

Shares in MEI Pharma (MEIP 7.51%) are tumbling 15.3% at 11:55 a.m. EDT on Thursday following news its collaboration partner, Helsinn Group, is discontinuing a phase 3 trial of pracinostat in acute myeloid leukemia, or AML.

So what

Helsinn Group was studying pracinostat alongside Vidaza as a potential new front-line therapy for AML patients unable to receive chemotherapy. Unfortunately, an interim look at results by an independent monitoring committee showed the approach was unlikely to deliver better overall survival than the trial's control group, resulting in Helsinn's decision to end the study.

A toy rocket crashed into a table.

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Pracinostat's failure is disappointing given the need for new treatment options for older and frail AML patients. According to the biotech company, the cure rate for older AML patients is typically below 15%. If pracinostat's trial had been successful, MEI Pharma could've collected up to $444 million in milestone payments, plus royalties on future sales.

Now what

The discontinuation shifts investor's attention to MEI Pharma's ME-401, a potential treatment for relapsed or refractory follicular lymphoma (FL) patients that's being evaluated in a phase 2 trial.

In April, MEI Pharma licensed ME-401 co-commercialization rights to Kyowa Kirin for $100 million up front, plus development, regulatory, and commercial milestones totaling up to $582.5 million. If phase 2 results are positive, then the companies plan to file for accelerated Food and Drug Administration approval. If approved, MEI Pharma and Kyowa Kirin will split U.S. profits and MEI Pharma will receive tiered royalties on ex-U.S. sales.

The phase 2 trial is expected to be fully enrolled in the first half of 2021 and MEI Pharma estimates that cash on its balance sheet can last it into 2023. However, investors may want to be cautious despite the cash runway. MEI-401 is a PI3 delta inhibitor and although it's specifically designed for an improved safety profile, this class of drugs has been hampered in the past by safety concerns.