Many investors incorrectly assume that drug development is binary. A drug candidate either fails or succeeds, which results in significant volatility when clinical trial results are announced. The reality is more complicated, but this misunderstanding gains legs when companies implode overnight.
That's exactly what happened to Tricida (TCDA). Shares lost nearly 95% of their value on Oct. 24, plunging the company's market valuation from $605 million to just $33 million. The drug developer's lead and only drug candidate delivered no improvement over placebo in slowing the progression of chronic kidney disease (CKD). It was an unexpected result given prior clinical results. Kind of.
Despite the failure, the drug developer deserves a lot of credit for the level of transparency communicated to investors and fellow scientists. Many drug developers bury or fail to disclose unfavorable study results in much detail, but Tricida lifted the curtain on the results.
Can This Be Salvaged?
To be blunt, there's virtually no future for Tricida. It went all-in on a single drug candidate and failed to deliver success. There's not much more that can be done at this point, which is why the company is being priced for insolvency.
Tricida was developing veverimer to slow the progression of CKD. The idea was intriguing. Veverimer is a polymer designed to mop up excess hydrochloric acid in the gastrointestinal tract before being excreted through feces. The hypothesis was that the drug candidate could treat metabolic acidosis (too much acid) associated with CKD, therefore slowing disease progression and improving kidney function.
It was a simple and elegant approach that had the potential to avoid side effects of experimental drug compounds and not disrupt delicate molecular balances in metabolically-fragile patients. If veverimer worked in CKD, then it may have had potential in high blood pressure, cardiovascular disease, and other ailments.
Previous clinical trials suggested the drug candidate might be working.
- A phase 1/2 study found all patients responded within 24 to 72 hours of treatment and compared to placebo achieved statistically significant increases of bicarbonate in their blood, which is a sign that hydrochloric acid levels were being reduced.
- A phase 3 study that enrolled 217 individuals delivered similarly impressive increases in bicarbonate levels after 12 weeks of treatment.
The most recent phase 3 study moved beyond bicarbonate levels as an endpoint and instead evaluated veverimer's ability to preserve kidney function. If hydrochloric acid levels were reduced and bicarbonate levels were increased, then doctors assumed it would lead to a clinically-meaningful slowing of kidney failure.
Surprisingly, there was absolutely no difference between veverimer and placebo in slowing the loss of kidney function. There were roughly 2,200 patients enrolled in the study, which was more than adequate.
Regulators are unlikely to care about metabolic balances of hydrochloric acid and bicarbonate if patients fail to derive any benefit. Therefore, it makes sense that investors are abandoning Tricida.
More Drug Developers Should Follow This Example
However, the level of transparency and detail provided about the failed clinical trial is impressive. Many companies simply issue a press release stating a study failed to meet its primary endpoint, thank the doctors and patients, and give a brief nod to the disappointing outcome. Tricida didn't do that.
The precommercial drug developer pulled back the curtain on the data. They were surprisingly bad, but failure is part of science. Progress doesn't occur along a straight, linear trajectory built on continuous success.
The transparency highlights the risk of investing in precommercial drug developers, but also the importance of measuring clinically-meaningful endpoints in early and mid-stage clinical trials. There was never much clinical value in only evaluating levels of hydrochloric acid and bicarbonate. Tricida designed multiple studies to measure those endpoints, and proved successful, but that wasn't actually testing the hypothesis for slowing the loss of kidney function.
Nonetheless, by publishing detailed data on the failure of veverimer and showcasing the failed results at medical meetings, Tricida is allowing fellow doctors and scientists to avoid making the same mistakes themselves. That could save money within the health care system, lead to new innovations based on similar (or completely different) ideas, and potentially help deliver effective treatments to patients faster.
Tricida needs to figure out the next steps for veverimer, which don't appear numerous or favorable. Nonetheless, investors should cheer the transparency in the midst of failure and hope more drug developers follow this example.
