A Drug Suicide

The University of Phoenix is for-profit, and near the top of the list by size. The Wiki link has the story. It advertises, a lot. The current campaign stresses that there are a slew of red executive-sock wearing graduates out there, just itching to give you, newly minted alum, a job. Not a word about what they'll teach, or you'll learn. For the Phoenix grad, it's who you know rather than what you know. If that sounds a bit like what Ponzi dreamed up, I won't argue. Having "taught" at a for-profit computer school (certificates, not degrees on offer), the tale of the Wiki is deja vu. Profit tends to corrupt, when there's no cop on the beat, or he looks the other way.

Which brings us to the recent collapse of Vical. As I type, its market cap is less than half of what it was on Friday. Vical is a small, yet smaller, biotech/biopharma/pharma (it's hard to tell which term means what, these days) that had two interests: vaccines for infecious diseases, and Allovectin-7 as a cancer immunotherapy. Immunotherapy has been, but may be not much longer, the sexy path in oncology. If you surf over to its Yahoo! page, you can find links to various publishing under the "Headlines" section. "Seeking Alpha" posts links to Yahoo!, so it's prominent there. Other such sites exist. SA is essentially an organized message board where the pumpers and bashers have at it 24/7/365, with the goal of influencing retail gamblers to either buy or short stocks. Every now and again, and I can't figure out their criteria, they'll generate and archive a conference call for a company, usually an earnings call.

This time, they provide a transcript on the post-mortem CC of the Phase III trial of Vical's primary compound, Allovectin-7. You can follow the breadcrumbs on A-7 development through the Yahoo! message board, SA articles, SEC filings, and clinicaltrials.gov. Vijay Samant, CEO (not the first one) does the presentation, and takes (invited only) questions.

This is where it gets interesting:

As a company and as individuals, we have invested substantial efforts and resources into the Allovectin program for nearly 20 years.

He then goes on the characterize the trial:

We believe the results are clear and conclusive, but no margin for alternative interpretation. Allovectin, simply, did not provide the expected benefits, we do not see a feasible path forward for Allovectin and we are therefore terminating the program.

What? It took 2 decades to figure out that this compound was no better than Standard of Care (SoC) chemotherapy? If you follow through the SA articles, you find anonymous (mostly) posters who had concluded that the trial would fail. Company statements had been necessarily ambiguous leading up to the results, but the point for this essay is that the initial description of the trial by Vical had the trial ending more than 2 years ago. As the date slipped, the zealots started the "the trial is extending, and the SoC (control arm) patients can't be living longer, so A-7 has to be gangbusters' good". And so it went for years.

The key information that we released today is that the trial did not meet either the primary or secondary efficacy endpoints and the program is terminated. There is absolutely no ambiguity here, okay.

Phase III trials, particularly oncology, often fail. Phase III is the last step to filing for FDA approval, so a Phase III will have the least likely chance of making a bad drug look good. There are lots of ways to do that, generally revolving around patient screening and is expected in Phase I and Phase II trials. Also, earlier trials have as few as 1/10 the number of patients, so cherry picking isn't out of the question. Phase III trials are (almost?) always double-blind, so no one involved knows enough to bias the results (if the blinding is adhered to; there have been stories about some trials, especially outside US/EU.

Note also, no statement about searching for beneficial sub-groups, and the like. Most often, when a Phase III trial fails, the company will find that left handed redheads during the full moon did much better, so they'll pursue approval (without a new trial, of course) for the left handed redhead dosed at full moon group. 2 decades, and not even a sub-group? That's abject failure.

How could a company pursue a dead end for 20 years? Simple: it's what they do. Small bios have one good idea (they think it's good, anyway), and pound on it until it either rises like the phoenix, or dies utterly. The standard meme is that the public sector is mired in do-nothing bureaucracy, while the private sector is data driven survival of the fittest. Not always. In the case of these mini/micro-cap pharmas, the managements and BoDs are in it for the sinecure. Most put most of their shares in retails hands; the pros don't bother. Rarely, GenVec is a current exception, will a board throw in the towel after total failure. It just isn't in their profit driven self interest.

Here's a bit of exchange:

Eric Schmidt - Cowen & Company

Okay. And one more question and I am not trying to be harsh, I appreciate your personal commitment to seeing Vical through, but I do have cash, it's been well over 20 years if Vical has been working on DNA-based delivery technology and still no major successes to show for. When you and the Board discuss the potential future of the company, will you include in that discussion things like basically winding down operations and just trying to monetize the existing partnerships you have and give back cash to shareholders?


Vijay Samant - President and Chief Executive Officer

The answer is no Eric, because if you go back and look this failure has nothing to do with the DNA platform, it has to do with the mechanistic approach of how this cancer mechanistic DNA based application is going to work and it didn't work. ...

Note, while I didn't hear the inflection in his voice, Samant appears to see no irony in the fact that it took 20 years to find out that the *basic mechanism* avowed for A-7 simply doesn't exist.

So, what's the moral of this sad tale? I'd say: biostats and scientists are an emasculated bunch. There is a continuing stream of press on the "fact" that it takes $1 or $2 or $4 billion to bring a drug to market. Only a team of forensic accountants can determine whether any of those numbers is true; how much of that $1 billion was management salaries, expenses, bonuses, consultants, and the like charged back? How much was wasted on deadends, just because Dr. Yes wouldn't concede that compound Q doesn't work, but he had enough juice with the Corner Office to continue? How much was due to trial designers succumbing to both the pressure of The Suits to continue and the need to pay for little Billy's braces?

My memory is foggy, but it tells me that before the liberalization of patenting, most drug development was directly funded by the government. Perhaps we need more enforcement of Phase III type gating early on. In the case of Vical, its 15 minutes of fame are about over, and won't be long remember, except for those who bet their 401(K)s on it. If the public, particularly investors in such outfits, had access to the full datasets of all pre-clinical, clinical, and trials, this sort of nonsense wouldn't happen. We do, after all, have R for everyone. There's the famous quote "given enough eyeballs, all bugs are shallow." Drug companies have been fighting opening their data for quite a long time. Patents, and all that. Trial data is different. All of it should be publicly available. Such a tack would also move to dispel distrust of FDA, too.

There'd likely be fewer jobs for techy types, and suits, since the Vicals wouldn't provide employment for 20 year stretches. But, is that a bad thing? If the USofA is supposed to be the one place on Earth where merit trumps birth or connections, shouldn't we have rules to make it so?