Ladenburg cuts Flex Pharma to neutral, drops PT

Ladenburg Thalmann downgraded Flex Pharm (NASDAQ:FLKS) to “neutral” from “buy” without a price target after the company halted two Phase 2 trials. In afternoon trading on June 13, shares of Flex were quoted at $1.36, down $2.82, or 67%.

The company closed Phase 2 studies of FLX-787 with 100 patients each in amyotrophic lateral sclerosis (ALS) and Charcot-Marie-Tooth (CMT) due to oral tolerability concerns observed in both studies. A Phase 1/2 study in 10-to-15 ALS dysphagia patients is ongoing, as it is a single-dose study, writes analyst Michael Higgins.

The company also is reducing its workforce by 60% to preserve its capital while it considers strategic alternatives.

“Based on our conversations with management, we do not believe the oral tolerability problems are related to the potential spiciness of FLX-787,” Mr. Higgins said.

“We believe the oral tolerability concerns in both studies (ALS and CMT) are distinct from any spiciness, as management has told us that patients are reporting the tolerability problems develop days or weeks after starting therapy and are closer to the feeling of lemon into a micro-cut on dry, winter skin than any spicy, burning sensation upon initial dosing,” he added.

Mr. Higgins said it is not known at this time if FLX-787 can be reformulated to eliminate this problem.