British cancer specialist Antisoma
Chief Executive Glyn Edwards told Reuters Antisoma was now unlikely to get any money from ASA404, which had been the company's biggest drug hope.
An interim analysis concluded that continuing with the study would be futile, as there was little or no prospect of demonstrating a survival benefit in patients with previously untreated non-small cell lung cancer.
Novartis will undoubtedly do a full commercial appraisal based on this new evidence, Edwards said in an interview.
We have to say it's quite unlikely that we will get any future cash flows from this program, although we weren't expecting anything in the short term.
Novartis had been planning to file ASA404 for approval next year. The Swiss drugmaker said it was now evaluating the overall clinical program for ASA404 in both lung cancer and other indications.
Antisoma shares nosedived in early trade, losing as much as 72 percent to hit an all-time low of 9 pence. They were trading at 10.5 pence by 1050 GMT, valuing the company at around 60 million pounds ($90 million), down from 200 million on Friday.
Andy Smith, a biotechnology fund manager at AXA Framlington, said the failure highlighted shortfalls in earlier testing, noting Phase III studies represented a higher bar because they included more diverse and often sicker patients.
Novartis bought the global rights to ASA404 three years ago, after the drug was previously rejected by rival Roche
It had been touted as the first in a new class of anti-cancer drugs designed to disrupt the flow of blood to tumors, working in a different way to Roche's established medicine Avastin, which also starves tumor cells of blood.
HOPES NOW PINNED ON Leukemia DRUGS
ASA404 was one of two key products from Antisoma in final Phase III trials, the other being leukemia treatment AS1413, which Edwards said would remain the focus of investment, alongside another leukemia drug in Phase II called AS1411.
Those are the two priority programs. We will make cost savings elsewhere, but we have enough cash to get comfortably beyond the Phase III results for 1413 (in late 2010 or early 2011) and Phase II results for 1411 (in early 2011), he said.
Antisoma had unaudited cash and short-term investments of 45.1 million pounds ($67.41 million) at the end of February 2010, which Edwards said was enough to fund it through 2011, provided it made savings. Cutbacks could include job losses, he added.
Antisoma would also be much more pragmatic about striking fresh licensing deals to bring in cash from its unpartnered programs, including AS1413.
All our remaining programs are not partnered at this point, so we have plenty of time to talk to people, Edwards said. We're not considering any equity fundraising.
The failure of the so-called ATTRACT-1 study was particularly disappointing given the encouraging Phase II data reported in the same setting, he said.
Samir Devani of Nomura Code, who reduced his rating for Antisoma to neutral from buy, said ASA404 had represented approximately 80 percent of his risk-adjusted net present value for the company. He now values the stock at 12 pence a share.
Novartis shares were down 1 percent, only slightly underperforming the European sector <.SXDP>, reflecting the relatively small role of ASA404 in its large drug pipeline.
Novartis has a very robust pipeline in oncology and we will continue to drive research and development in oncology and we have plenty of other compounds in the pipeline, said Novartis spokesman Eric Althoff.
(Additional reporting by Katie Reid in Zurich; Editing by Sharon Lindores and Rupert Winchester)