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Merck KGaA, Oncothyreon hit as cancer vaccine fails

By Maria Sheahan and Ben Hirschler

FRANKFURT (Reuters) - An experimental lung cancer vaccine from Germany's Merck KGaA failed to improve survival in a pivotal study, dealing a blow to the company and the high-risk field of using vaccines to fight tumors.

Stimuvax, which Merck licensed from U.S. biotech firm Oncothyreon, failed to increase overall survival in the Phase III clinical trial, the German chemicals and pharmaceuticals group said on Wednesday.

The trial's coordinating investigator, Frances Shepherd of the University of Toronto, said the result was disappointing, although she said "notable treatment effects were observed in certain subgroups of patients".

While this could mean that Merck might conduct more studies to try and find particular groups of patients who would benefit from the treatment, industry analysts were skeptical that Stimuvax had any future.

"Despite potential positive effects in subgroups, we consider the drug dead," said Deutsche Bank analyst Holger Blum.

The trial was testing Stimuvax on more than 1,500 patients with stage III non-small cell lung cancer whose tumors could not be completely removed via surgery and whose disease had at least stabilized following chemoradiotherapy.

Merck said it would discuss the data with experts and regulatory authorities over the coming months.

Helvea analyst Odile Rundquist, who cut her price target on Merck by 2 euros to 97 euros a share, said the setback for Stimuvax was another blow for Merck's pharmaceutical division following recent disappointments with cancer drug Erbitux and the earlier failure of cladribine in multiple sclerosis.

Merck shares fell 3.3 percent to 98.22 euros by 1145 GMT, while Germany's blue-chip DAX index was up 0.2 percent. The market impact was limited by the fact that many Merck analysts had not included Stimuvax sales forecasts in their financial models, given the risky nature of the project.

The news is a much bigger setback for the German company's small U.S. partner Oncothyreon, whose shares fell 70 percent in premarket trading on Nasdaq.

Stimuvax is one of a number so-called therapeutic cancer vaccines being developed by drug companies to fight tumors by stimulating the body's immune system.

The first such vaccine was approved two years ago but Provenge for prostate cancer, made by Dendreon, has met with limited success, due to management missteps and doctors' reluctance to adopt the difficult-to-administer therapy.

A number of other cancer vaccines are in development that analysts believe may be more successful, including a product from GlaxoSmithKline against melanoma and lung cancer which is set to report clinical trial results next year.

Some investors had already been wary about prospects for Stimuvax after Merck said in March the trial would be continued and final data would be presented later than expected, raising doubts over its success.

"Given the history of the drug's development with postponements, discontinuations and break-ups we are not surprised about today's outcome," DZ Bank analyst Peter Spengler said.

(Editing by Erica Billingham)

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