We've seen this story before:

  • Drug fails.
  • Large pharma partner hands it back to biotech developer.
  • Biotech claims it's now in "a favorable strategic position" or some such wording.
  • Stock slumps.

Today's latest victim: Prosensa (NASDAQ: RNA). The biotech licensed its Duchenne muscular dystrophy drug drisapersen to GlaxoSmithKline (GSK), but the development hit a road block when the phase 3 trial failed to show a statistically significant difference in walking ability between patients taking drisapersen and those getting a placebo.

The whole kit and caboodle
Part of the 2009 licensing agreement gave GlaxoSmithKline the options to license three more compounds to treat Duchenne muscular dystrophy. The disease can be caused by different mutations, and each needs to be treated with a different drug, albeit using the same underlying exon-skipping technology.

Not only did Prosensa get drisapersen back, but it'll also retain the rights to the drugs further back in development. Beyond drisapersen, Prosensa has five additional drugs in development, including three that are already in the clinic.

The early-stage compounds could be the silver lining in GlaxoSmithKline's ending of their partnership. Of course, if the underlying technology is the problem, they might not work, either. With only one drug through phase 3, it's hard to say one way or the other, but it seems GlaxoSmithKline isn't willing to stick around to find out.

For that matter, we don't really even know if drisapersen is dead yet. The best time to test a Duchenne muscular dystrophy drug is right before patients start losing their ability to walk. But the timing of the disease progression is variable, making it hard to control for. It's possible the phase 3 trial failed not because drisapersen doesn't work, but because more late-progressing patients were assigned to the placebo group.

Moving forward
In its press release, Prosensa didn't say what it plans to do with drisapersen. The company is presenting at the J.P. Morgan Healthcare Conference on Thursday, but I'm not sure investors should count on getting much of an update. According to a letter sent to patient group representatives, the biotech is still analyzing the data to determine the best path forward.

The decision will affect Prosensa's biggest rival Sarepta Therapeutics (SRPT 4.18%), which is in the process of designing a phase 3 trial for its Duchenne muscular dystrophy drug eteplirsen. Not only is there still potential for competition down the line, but if Prosensa continues development of drisapersen, Sarepta and Prosensa could be competing for patients to enroll in their clinical trials at same time, which could slow down development of both drugs.