GenVec Inc. said yesterday that Pfizer Inc. will discontinue financial backing for GenVec's lead product candidate, but said the decision wasn't based on results from human tests of the gene therapy.
The Gaithersburg company sought to put a positive spin on the news, saying Pfizer no longer will be entitled to royalties from BioBypass. The drug is designed to treat vascular problems by promoting growth of new blood vessels. Pfizer has paid GenVec $60 million as part of the collaboration.
"From a business point of view, it's much better for GenVec to own the drug," GenVec Chief Executive Officer Paul Fischer said in an interview yesterday. He said Pfizer dropped BioBypass because it has an unusually full pipeline of prospects and that the gene therapy wasn't a good fit.
Pfizer officials didn't respond to a request for comment.
Wall Street interpreted the news as a negative for GenVec, sending its shares down as much as 40 percent before they steadied to close at $3.60, down 41 cents or 10 percent, on the Nasdaq stock market.
A.G. Edwards analyst Craig West said the news was negative but not a catastrophe. "Do I care as an analyst or an investor? No, not really," he said. The reason: "We're going to get our answer on whether BioBypass works," he said, because the human tests that have been initiated will continue.
"I happen to believe that, given the facts presented to us today, it was a sober, strategic business decision on whether to [continue] to invest in a very young technology - gene therapy," J.P. Morgan Chase & Co. analyst Franklin M. Berger said. "The subtext is, who knows what? Does Pfizer know something they're not telling us?"
Yesterday, Fischer said in a conference call to analysts that neither company has any results on the drug's effectiveness from current Phase II clinical trials, the second of three phases of human testing required by the Food and Drug Administration.
The drug is being tested as a treatment for heart disease and, separately, poor circulation in the lower legs. Results are expected late this year.
Pfizer will continue backing the Phase II trials for six months. By that time, Fischer said, the testing should be all but wrapped up, leaving GenVec with the relatively modest financial responsibility of monitoring the last few patients. The company said it will be able this year to pay those costs, move its TNFerade anti-tumor therapy into Phase II trials as planned and initiate a Phase I trial for its third product, a therapy for macular degeneration - a disease characterized by bleeding in the eyes.
The company reported $42 million in cash as of Dec. 31. Fischer said the balance was adequate to carry GenVec and its development plans until 2004.
If the Phase II BioBypass results are positive, GenVec would have a strengthened bargaining position if it chooses to seek a new large corporate partner.
BioBypass is made up of a gene encased in a deactivated cold virus that acts as a transport. The gene gives the instructions for the making of a protein that encourages blood vessels to grow. It's used in tissues with inadequate blood flow. The drug is administered directly to the heart by a needle or catheter and to the leg by injection.