Tuesday August 14, 11:05 am Eastern Time
Hemosol stock drops on FDA delay of blood trial
TORONTO, Aug 14 (Reuters) - Shares of Hemosol Inc. (Toronto:HML.TO - news) (NasdaqNM:HMSL - news) plunged 37 percent on Tuesday morning after U.S. regulators asked for changes to the clinical trials of its artificial blood product, which could delay the launch of the product in the United States by up to a year.
Hemosol said late on Monday that it has been asked by the U.S. Food and Drug Administration to amend the protocol surrounding the pivotal Hemolink trial in the United States. This marks the second time in the past few months that the FDA has asked for changes to the phase 3 study involving coronary surgery patients.
The company is in the midst of an expensive development project for its Hemolink blood substitute, which is derived from human red blood cells and is aimed at replacing the need for donor blood in surgeries.
Shares of Hemosol plunged 39 percent or C$4.73 to C$7.20 on the Toronto Stock Exchange as analysts lowered their earnings estimates and target prices for Hemosol. On Nasdaq, the shares fell $3.08 to $4.62.
Hemosol said in a statement that it no longer expects to complete enrollment of its U.S. clinical trial by the first quarter of 2002, although regulatory filings in Canada and Britain are still on track for possible marketing approvals by the end of 2001.
``Today's announcement is very unexpected as Hemosol fully anticipated clearance by the FDA on the current amended protocol,'' wrote National Bank Financial analyst Dimi Ntantoulis.
And although it is not clear from the FDA's verbal comments made to Hemosol thus far, Ntatoulis speculated in her report that the FDA wants a full-blown phase 3 trial incorporating higher doses of Hemolink, with rates of avoidance of donor blood transfusions of 90 percent.
The net effect to Hemosol is that it will not achieve its previously stated schedule of fully enrolling patients in its U.S. phase 3 trial by the first quarter of 2001, which pushes back any launch in the lucrative U.S. market, analysts said.
Charles Olsziewski of UBS Warburg lowered his 2004 earnings estimates for Hemosol to a target of 55 cents a share, down from a previous 90 cents a share, and lowered his price target on the shares to $10 from a prior target of $17.
Analysts said the FDA had made it clear that amendments to the trial are not because of the safety or efficacy of Hemolink, but rather a ``protocol design issue''.
Ntantoulis suggested in her report that the FDA's unexpected about-face could stem from the recent failure of Alliance Pharmaceuticals phase 3 trial for its Oxygent product, an oxygen substitute.
``It is quite possible that the FDA, having seen a higher incidence of stroke in the Oxygent treatment arm, would be concerned about seeing a similar problem in the Hemolink trial, even though the two products are quite different,'' wrote Ntantoulis.
($1 equals $1.54 Canadian)
