CollaGenex shares drop after acne-drug-test result

Shares of CollaGenex Pharmaceuticals Inc. fell 18.5 percent yesterday after the Newtown company said it suspended enrollment in a mid-stage study of a new acne drug after one patient experienced a severe adverse reaction.

The company said one of the 10 patients enrolled in the study showed significant phototoxicity - a severe reaction to sunlight that can cause blisters and second-degree burns - after being given 40 milligrams of the modified tetracycline, called incyclinide.

Phototoxicity is a known side effect of tetracyclines, which are antibiotics, the company said.

CollaGenex said it was investigating and would meet with the Food and Drug Administration to discuss the drug's future development.

President and chief executive officer Colin Stewart said that since no adverse events were observed at lower doses, the company was continuing a mid-stage trial of incyclinide for the treatment of rosacea, a condition associated with inflammatory skin lesions and facial redness.

Incyclinide at doses of 5, 10 and 20 milligrams showed efficacy and side effects similar to placebo, he said in a conference call with analysts.

In late March, the Bucks County company began enrolling patients in a 40-milligram-dose study. As of Tuesday, 10 patients were enrolled, and one had developed "apparently significant phototoxicity," Stewart said.

"We have suspended enrollment in the trial while we investigate this case."

Klaus Theobald, CollaGenex chief medical officer, said the patient's condition had been described as a "really bad sunburn" with some blistering. "It's a severe sunburn reaction."

Separately, CollaGenex reported a narrower first-quarter loss of about $5 million, or 23 cents a share, compared with a loss of about $9.3 million, or 54 cents a share, in the same quarter a year earlier.

Revenue for the first quarter was $14.3 million, including $11.1 million in sales of Oracea, the company's flagship drug to treat rosacea, approved by the FDA last May. The company anticipates revenue of $64 million in 2007, including $54 million in Oracea sales.

The stock closed down $2.60 at $11.42 on the Nasdaq.