Biotech Implosion: Coley Pharmaceutical Group (COLY)

Shares of microcap biotech Coley Pharmaceutical Group (COLY-NASDAQ) saw shares get pounded late on Wednesday afternoon.  Right before 2:00 PM EST, the company announced that its partner Pfizer (PFE-NYSE) had discontinued and exited its pact with Coley in the development of lung cancer investigational compound PF-3512676 as a combination with cytotoxic chemotherapy. This also included two Phase 3 clinical trials and two Phase 2 clinical trials.  Ouch.  The independent data safety monitoring committee determined there was no additional clinical efficacy over that of chemotherapy alone.  "No efficacy" is one of those snippets that is worse for biotechs than "abnormal events" or even "Severe side-effects." 

Robert L. Bratzler, Ph.D., President & CEO of Coley: "This news is surprising based on the signs of clinical activity observed with PF-3512676 in Coley’s Phase II randomized clinical trial and we are disappointed with this setback in the program.  We remain focused on advancing our portfolio of TLR Therapeutic candidates for the treatment of cancer, allergy and asthma, lupus and rheumatoid arthritis, and as a vaccine adjuvant, including novel small molecules and RNA- based drugs targeting TLRs7, 8 and 9."

Coley closed out the day down 59%, or $5.03, down to $3.46 on the day.  The 52-week trading range had been $8.00 to $13.90.  Intraday lazard cut this from Buy to Hold.  The company now only has a $91 million market cap.  At the end of last quarter the company ended with more than $97 million in cash, but total liabilities carried on the books were listed as $48 million.  This will essentially drop the company to even less in revenues, although it does still have partnerships and collaborations on other candidates with Sanofi-Aventis (SNY-NYSE/ADR), GlaxoSmithkline (GSK-NYSE/ADR), Novartis (NVS-NYSE/ADR), and the U.S. Government.

So far, Coley’s conference call has failed to generate any real support for the stock.  This hasn’t gone into the mode of a biotech zombie yet, but this is a pretty severe blow considering this was Coley’s lead candidate.

Jon C. Ogg
June 20, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in any of the companies he covers.