Shares in biopharma firm Faron Pharmaceuticals (FARN:AIM) have plummeted over 80% to 126p after its Phase III trial for its Traumakine treatment failed.

Faron says Traumakine did not result in an ‘increased number of ventilator-free survival days or a reduced mortality rate’ when compared to a placebo.

The shocking clinical trial failure flags the huge risks that small pharma companies face when trying to develop new drugs.

Faron’s clinical trial failure is the latest in the small cap space after ImmuPharma (IMM:AIM) revealed its Lupus drug failed to show meaningful benefits over a placebo in Phase III trials last month.

Faron’s lead candidate Traumakine aims to treat patients with moderate to severe Acute Respiratory Disease Syndrome (ARDS), a severe orphan disease with no approved pharmacological treatment.

ARDS can cause widespread capillary leakage and inflammation in the lungs after pneumonia, sepsis or significant trauma.

In the 300-patient study, all cause mortality in the group treated with Traumakine was 32.6% on day 90, which barely beat the placebo group at 31.6%.

WHAT HAPPENS NEXT?

Chief executive Dr Markku Jalkanen says the company will look at results from its Japanese study in the third quarter of 2018 to decide how to advance Traumakine in clinical development.

The biopharma company still plans to advance its antibody Clevegen into clinical development to tackle solid cancers this year.

Broker Panmure Gordon’s Dr Julie Simmonds is surprised by the clinical trial results as the mortality rate in the placebo group is significantly lower than previous trials run by Faron.

The analyst expects the company to pare down its commercial and regulatory activities for Traumakine immediately, cutting down on cash burn.

‘Even if the Japanese Phase III trial reads out positively, at least one further trial is likely to be required unless a legitimate explanation for the strong result in the placebo group can be established,’ says Simmonds.

In response to the trial failure, the analyst has withdrawn her recommendation and forecasts until the route forward becomes clearer.

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Issue Date: 08 May 2018