By Rosmi Shaji
(Reuters) - MEI Pharma lost more than two-thirds of its market value on Monday after the company's cancer drug failed to meet the main goal in a mid-stage study.
The drug, pracinostat, was being tested in combination with chemotherapy drug azacitidine to treat patients with myelodysplastic syndrome (MDS) - a blood cancer where immature blood cells in the bone marrow fail to become healthy cells.
The trial failure raised questions about the future of the drug, which is also being tested for another rare blood cancer.
"The risk profile for pracinostat has significantly increased and one potential scenario is the discontinuation of the drug's development," Roth Capital's Joseph Pantginis said, slashing his price target on the stock to $2.50 from $14 and downgrading it to "neutral" from "buy".
The company's shares were down 68 percent at $1.99 in morning trading on Monday. Up to Friday's closing, the stock had climbed 52 percent in the past three months.
Pantginis said Pracinostat's failure called into question a late-stage study of the drug in Acute Myeloid Leukemia (AML) patients, scheduled to begin in mid-2015.
The United States Food and Drug Administration has granted an orphan status to the drug for treating patients with AML. The status, granted to drugs being developed to treat rare diseases, gives developers incentives such as marketing exclusivity.
MEI Pharma said the combination of pracinostat and azacitidine showed no difference in complete remission in previously untreated MDS patients when compared with azacitidine alone.
Complete remission implies the disappearance of all signs of cancer in response to treatment. It does not always constitute a cure.
The company said it does not plan to start any further studies on the combination treatment until it gains a "complete understanding" of the clinical data.
"The underlying decision management is assessing is the overall market potential for pracinostat versus the cost of development", Pantginis wrote in a note.
The San Diego-based drug developer acquired exclusive worldwide rights to the drug from S*BIO Pte Ltd, a privately held biotechnology company, in August 2012.
(Editing by Saumyadeb Chakrabarty)