Wall Street lumberjacks took chain saws to both Forest Labs
The drug in question is milnaciprin, which has been used in Europe as an antidepressant for some time. Cypress had licensed the compound and then partnered with Forest to develop it for the treatment of fibromyalgia -- a disease that causes muscle pain, stiffness, and fatigue -- in the United States. Despite being relatively common, there is no approved therapy for fibromyalgia.
The two companies jointly announced yesterday that preliminary results from a phase 3 study involving nearly 900 patients failed to show statistical significance for the primary endpoints. Putting a positive spin on the news, the companies did point to trends in efficacy and will continue with both an in-progress phase 3 study and a planned additional phase 3 study.
It's tough to say whether these additional studies will do any good. More often than not, when a drug fails to meet phase 3 endpoints, that's the beginning of the end. That said, these studies seem to be a little trickier than most. There really aren't many objective endpoints here -- the success of the drug has more to do with the patient's perception of pain, stiffness, and fatigue. That means that there could have been an unusually large placebo effect, and so maybe these additional studies will show more promising results. Even if the later studies turn positive, though, the drug likely couldn't be filed for approval until late 2007 or early 2008.
Both companies really need this drug to work. Forest Labs has already had problems with its neramexane compound for the treatment of Alzheimer's disease, and the pipeline cupboard is looking pretty bare. What's more, Forest Labs is facing a patent trial in December with Ivax
Cypress had only two drug candidates in testing, and this was the one furthest along. Its other candidate -- mirtazapine for obstructive sleep apnea -- seems to be a high-risk-high-reward sort of prospect. On a more positive note, though, Cypress does seem to have a fair bit of cash, and the current valuation doesn't seem to be expecting too much of the company.
Even though Cypress is far riskier, it might actually be the better pick of the two for very risk-tolerant investors. Forest seems to really have issues with its pipeline behind Lexapro, and that's a problem, given the long-term nature of drug development. For Cypress, it's likely to be a binary outcome -- a big win or a big loss -- but if milnaciprin somehow ends up being approvable (even though it now looks like a long shot), the stock would have a lot of room to run.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares). Oddly enough, he has cypresses in the front yard and a forest in the back.
