Cardiome Shares Remain Low On Merck’s Abandonment Print
By Brian Wilson, Lead Contributor   
Tuesday, 18 December 2012 03:05
icon_newsnotesEarlier in the year, specifically on March 19th 2012, shares of Vancouver based Cardiome Pharma Corp (NASDAQ: CRME) dropped from $1.93/share or so to $.88/share in reaction to a press release regarding their partnership with the pharmaceutical giant Merck.

Merck was to officially discontinue development of the oral version of Cardiome's flagship drug vernakalant, which left the IV formulation (referred to as vernakalant IV in the release). Merck apparently made the decision based on the regulatory environment, and the projected development timeline of vernakalant oral.

While there were some beneficial effects of this partnership termination, like significantly reduced development expenses and cash burn for Cardiome Pharma, investors did not like the fact that oral vernakalant was out of the picture.

According to CEO Doug Janzen's statements, vernakalant oral also had a well-established profile for both efficacy and safety. As a long-term prevention treatment for atrial fibrillation, both Cardiome and the market seem to agree that an oral formulation would have been superior. Not only do oral formulations of drugs not have to deal with the invasiveness of IV formulations, but patients (and doctors) find them much easier and more convenient to administer. Whether or not Merck made the "right" decision is very debatable up to this point. For now, vernakalant oral is stuck in phase II development unless something can finance its progress later on.

Vernakalant IV has already been approved in Europe and Latin America and is marketed under the name BRINAVESS. Merck held commercial rights to this drug until September 26th 2012, when global marketing and

development rights were returned to Cardiome - presumably after Merck did a bit more of their own research on the cardiovascular drug market.

While investors seemed to like the idea that Cardiome had regained the rights to its drug, the fact that Merck was so unimpressed by its prospects that it decided to basically dump the drug from its pipeline this year does bring up some concerns that should be considered by anyone that is considering an investment in this biotech stock.

While the prospects of any drug are never completely black or white, it's important to realize that Merck must have seen something wrong (or at least lacking) with vernakalant. On the bright side for Cardiome, the patient population that could be using the drug as a long-term treatment to prevent atrial fibrillation is enormous (Cardiome's research suggests that one out of every three patients admitted to hospitals for cardiac arrhythmia have atrial fibrillation).

Going forward, vernakalant has two major obstacles towards achieving its true potential. First is its troubled attempt at approval in the United States. Recall that vernakalant was put on clinical hold as far back as October 2010 by the FDA in the middle of its Phase III ACT V trial, which should bring up some concern on the drug's safety and

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long-term chances of US approval. The second is the fact that small pharmaceutical companies have big trouble with the marketing of drugs - especially those that target enormous drug markets. While Cardiome could theoretically do well by selling vernakalant IV by itself, Merck's resources would have been extremely helpful.

Another indirect consequence of the misfortune that Cardiome has seen this year is related to its actual stock price. NASDAQ listing qualifications indicate that its stocks have to be above $1/share to prevent delisting. Cardiome is only trading at $.50/share as of yesterday's closing bell, even after a substantial rally caused by a settlement of its debt obligations to Merck that was caused by the return of commercialization rights to vernakalant.

 As dismal as the situation seems for Cardiome at this point, there is some hope of redemption for the stock. CRME would react quite well to news that the FDA removed its clinical hold on vernakalant IV. There is also a small chance that vernakalant could be scooped up cheaper by another pharmaceutical company that is willing to save Cardiome. Still, the takeaway is that CRME seems very risky even though the stock has fallen so far. It's in danger of a reverse stock split in the near future too, which is generally bad for shareholders due to negative perceptions that develop about biotech stocks that have to perform those reverse splits to regain NASDAQ compliance.

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