Disheartening News for AtheroGenics

Shares of the drug company plunged Monday after unfavorable results for its primary compound in a clinical trial

AtheroGenics (AGIX) had staked its business on a new drug called AGI-1067, which the Atlanta company hoped could combat a deadly accomplice of coronary disease -- clogged arteries. News hit March 19 that an advanced study of the drug has failed -- but researchers also discovered a few glimmers of encouraging information.

The company has focused its efforts on compounds to battle chronic inflammatory diseases such as rheumatoid arthritis and asthma. AtheroGenics' lead drug candidate AGI-1067 is supposed to prevent atherosclerosis, which is artery clogging that can contribute to a heart attack or stroke. The company said Mar. 19 that a study found no difference between AGI-1067 and a placebo in preventing major heart problems such as cardiovascular death, resuscitated cardiac arrest, heart attack, stroke, need for coronary revascularization and admission to hospital for unstable angina.

Although the researchers didn't discover what they had hoped to prove, they gleaned other encouraging information such as AGI-1067's impact on a combination of cardiovascular death, heart attack and stroke. The study's principal investigators, Jean-Claude Tardif, M.D., and Marc Pfeffer, M.D., Ph.D., plan to present their results in full at the American College of Cardiology Scientific Session in New Orleans on Mar. 27. "While the company is disappointed that the composite primary endpoint was not met, it is encouraged by the positive results demonstrated in a number of disease states," AtheroGenics said in a press release Mar. 19.

Investors focused on the negative and sold the shares Mar. 19, with the stock dropping more than 58% to $3.28 per share in early trading on March 19.

Some had been bracing themselves for the disappointment. Needham & Co. analyst Mark Monane said the trial's secondary outcomes were sufficiently encouraging to justify further

development of AGI-1067, according to Standard & Poor's MarketScope. However, Monane sees "a long road ahead" for further development of the compound and maintains an underperform rating on the shares.

Morningstar analyst Bill Buhr had seen only a 30% probability that AGI-1067 would be approved and is now reviewing his estimates to account for the drug's latest trial results. Buhr had believed AGI-1067 had blockbuster potential, since it might have been the first of its kind to directly treat inflammation associated with coronary heart disease.

AtheroGenics has little else to offer. "The company's pipeline is rather thin, and there currently aren't any other product candidates that we think could replace the lost sales of AGI-1067," Buhr said in a research note.

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