Ultragenyx Pharmaceuticals and Mereo BioPharma Group stocks crashed Thursday after their experimental treatment for brittle bone disease missed its mark in a second interim look.
That means the study will continue onto a final readout in the fourth quarter.
Analysts remained upbeat, however. The interim analyses took place after patients received six months and then a year of treatment with the drug, setrusumab. They are trying to show setrusumab reduces the number of fractures patients experience with osteogenesis imperfecta, the official name for what's colloquially called "brittle bone disease."
In midstage testing, patients had a 67% decrease in fractures over the course of 16 months, on average, Wedbush analyst Laura Chico said in a report. The final readout in the Phase 3 study will take place after 18 months of treatment.
"There still remains an opportunity for the Phase 3 (study called) Orbit final analysis to demonstrate efficacy even if investors were looking for an earlier stoppage in the study," she said. "With a limited catalyst lineup in the near term, we anticipate an overhang on shares until the final setrusumab data arrives."
At the close, Ultragenyx stock plummeted25.1% to 31.03, while Mereo shares shed 42.5%, closing at 1.69.
Ultragenyx CEO Focuses On The Upside
Ultragenyx Chief Executive Emil Kakkis remained confident "that increasing bone mass leads to stronger bone, less fractures, and improved physical abilities." In a statement, he acknowledged that the companies had hoped to stop the Orbit study early. But "we look forward to having results from both Orbit and Cosmic around the end of this year."
The Orbit study is taking place in patients ages five to 25, while Cosmic focuses on patients ages two to less than seven.
RBC Capital Markets analyst Luca Issi said this is "clearly not the outcome we were hoping for." But he noted Ultragenyx and Mereo didn't outline whether setrusumab missed its mark by a small or big margin in the second interim look. Further, the threshold to succeed in the final analysis is lower, making it easier for the drug to succeed.
"Overall, we would be buyers on the weakness as we continue to believe that RARE has a drug for OI," he said, noting setrusumab has shown increases in bone mineral density, and anecdotal evidence suggests patients are experiencing fewer fractures.
He kept his outperform rating on Ultragenyx stock.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
