Neuren Pharmaceuticals Ltd (ASX: NEU) has seen its share price plunge as low as 6 cents today, and is currently down more than 23% at 8 cents, after reporting disappointing clinical trial results.

Neuren is currently conducting a Phase 2 clinical trial of trofinetide in moderate to severe traumatic brain injury (TBI) in conjunction with the US Army Medical Research and Materiel Command.

Unfortunately, the results show no difference between Neuren’s drugs and a placebo in the 3 main efficacy measures – being the Extended Glasgow Outcome Scale (GOS-E), the Mayo-Portland Adaptability Inventory (MPAI-4) and mortality. The company says the overall rate of mortality was lower than observed in prior trials but not significantly different enough.

One measure that did show that the drug was superior to a placebo was in the Repeatable Battery for the Assessment of Neuropsychological Status (RBANS). RBANS is a series of tests completed by a patient to check for cognitive impairment, commonly used in the diagnosis and treatment of dementia.

Neuren says the failure is most likely due to two factors:

  1. The 260 patients enrolled its trial included a higher than expected proportion of patients with severe injuries to the chest and other parts of the body, and were less likely to respond positively to a drug targeting brain injury. What’s more, more of them were assigned to the drug group than the placebo group, resulting in an imbalance that was only partially adjusted for.
  2. The treatment of patients in acute critical care often involves large volumes of intravenous fluid replacement and diuretics, and it appears that this has led to significantly lower exposure of patients to the drug than had been targeted.

Neuren has placed the trial on hold while it considers the implications, but it seems investors and shareholders have no such qualms. However, the results don’t appear to negate the impact of the drug, just that the company might need to re-conduct its trial.

Foolish takeaway

Biotech and pharmaceutical companies with drugs in trial stages can often experience the highs and lows of success and failure, just ask investors in Pharmaxis Ltd (ASX: PXS), Prana Biotechnology Limited (ASX: PBT), Prima Biomed Limited (ASX: PRR), Novogen Limited (ASX: NRT) and the list goes on.

Like all companies with no commercial revenues, Neuren is a highly speculative investment which may or may not work out.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.