Here’s What Really Just Happened With Dermira, Inc. (NASDAQ:DERM)


Dermira, Inc. (NASDAQ:DERM) was one of the day’s big losers in the biotechnology space on Monday, with the company reporting data from a late-stage trial and disappointing pretty much across the board. As things stand, before the bell on Tuesday, Dermira shares are trading for a circa 65% discount to their open price on Monday and looking set to open the session at a deeper discount ahead of the market open today.

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So what happened?

The data relates to a phase III study that was set up to investigate the potential safety and efficacy of a drug called olumacostat glasaretil (DRM01), which the company is trying to get approved in a target indication of the treatment of moderate-to-severe acne vulgaris.

Most reading will probably already be familiar with this condition – it’s relatively common, which is one of the bonus points for a company like Dermira targeting it in the US – but those not that aren’t, chronic skin disease involving blockage and/or inflammation of pilosebaceous units (hair follicles and their accompanying sebaceous gland).

It will generally present as non-inflammatory lesions, inflammatory lesions, or a mixture of both, and affects mostly the face but, and as is not all too uncommon, also the back and chest.

The most common treatments for this condition right now range from topical administration assets (creams, lotions, that sort of thing) to oral antibiotics and steroids, but these often either don’t work (or reduce in efficacy over time) or have associated with them some pretty nasty side effects. Generally, the former efficacy issues are associated with the antibiotic treatments and the latter tolerability issues are associated with the steroid-based treatments.

So this is where DRM01 comes in.

Unlike the current standards of care in this space, DRM01 is designed to go after the lipids that make up what’s called Sebum – excessive sebum production is an important factor in the development of acne that is not addressed by available topical therapies.

The drug inhibits (that is, it’s supposed to inhibit) what’s called acetyl coenzyme-A carboxylase, which is an enzyme that plays an important role in the synthesis of more than 80 percent of the lipids that make up sebum.

In this sense then, it’s sort of going after the cause of the symptoms instead of the cause of the condition, but the idea is that if you can alleviate the symptoms then the condition is much relieved and quality of life in sufferers is improved.

That’s the idea.

So what happened with the investigation?

As highlighted above, and as represented by the steep dip in market capitalization that this company has experienced over the last twenty-four hours or so, the trial (technically there were two trials, with the phase III split into two separate studies, one called CLAREOS 1 and the other called CLAREOS 2) didn’t go well for Dermira and its shareholders.

The company noted on the release of the data that it failed to meet all co-primary endpoints in its two pivotal trials in this indication. In the two trials, the numbers of inflammatory lesions visible on a patient’s skin were reduced by 14.3 and 16.6 in patients treated with olumacostat glasaretil vs. a respective 13.7 and 15.3 for patients in the vehicle group. Similarly, the number of non-inflammatory lesions dropped by 14.8 and 17.8 for patients treated with the drug, compared to 11.2 and 17.4, respectively in the control group in the second trial.

So, as it turns out, the control arm of the study actually outperformed the active arm, which is the complete opposite outcome from that which Dermira and its shareholders would have liked to have seen at study close.

So where do things go from here?

Well, there’s really not much management can do other than drop the program. Shareholders aren’t going to back re-trialing a study that failed to outperform current SOC and a deeper analysis of the data is unlikely to uncover any argument that will sway this opinion.

That’s why the company has taken such a hit – this could have been a real boon to top line sales if it had come in as positive for Dermira.

Of course, there’s a reason that the current SOCs in this indication, however inadequate, dominate the space, and that’s that it’s incredibly difficult to get a fresh effective asset on shelves.

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