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May 20, 2015 comments

The perils of ignoring negative data

This week, Eleven Biotherapeutics ($EBIO) announced the failure of its Phase 3 trial of an IL1 antagonist in dry eye.   The company indicated they saw no way forward for the product candidate in this indication, which with a little translation, indicates a comprehensive failure of the study (rather than a near-miss on the primary end-point, for example). Unsurprisingly, the company lost most (around 75% in the first few days after the announcement) of its value as a result.
Drug discovery and development is hard, so failure is inevitable. It’s easy, then to shrug your shoulders, declare this as “one of those things” and hope the rest of your portfolio fairs better in the grand pharmaceutical lottery.
But is investing in pre-approval therapeutics company just a lottery?   After all, when these companies come to market in an IPO (in the case of $EBIO in February 2014), there is usually quote a lot information already known. How predictable was this failure.
After all, in 2013 Eleven Biotherapeutics completed a phase 1/2a trial of EBI-005 in dry eye patients – a trial that, according to the company “informed the design of the phase 3 study”. This study showed the agent to be safe and well-tolerated, but while it showed a numerical decrease in various markers of dry eye, as well as an improvement in the patients view of the symptoms, these changes were not statistically significant.
In other words, the only prior study of this drug candidate in this disease showed no changes at all that could not just as easily have been attributed to chance.
Even the rationale for adopting this mechanism of action in dry eye was “possible” or “plausible” rather than compelling. Yes, IL1 levels are increased in tear fluid from patients with dry eye, but so are lots of other pro-inflammatory markers (such as TNF-alpha). There was little in the way of genetic evidence to link this pathway to dry eye in humans, and non-human models of inflammatory diseases are notoriously unreliable.
On the positive side, the market for an effective treatment for dry eye may prove to be substantial, as the disease is both prevalent and poorly served by existing treatment paradigms. But optimism about commercial potential is of no value unless the drug actually works.
Its easy to sound smart after the event, but investors in companies like $EBIO have to ask themselves if they are surprised at all by today’s developments. If they are, perhaps they need a primer on statistics (and in fact, the situation is worse than they might imagine, because the chance of success in the phase 3 study depends not on whether the earlier trials were positive but on the false discovery …


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