* Baxter to stop late-stage studies of the drug for mild to moderate Alzheimer's
* Drug failed to reduce decline of cognitive functions
* Drug failed to preserve functional abilities of patients
* Shares down 3 percent
By Julie Steenhuysen
NEW YORK, May 7 (Reuters) - In a blow for Alzheimer's patients, Baxter International Inc said it will scrap late-stage trials of its antibody treatment for the disease after the drug failed to improve cognitive decline and functional ability in patients.
Baxter's treatment, known as Gammagard, did show a benefit in some patients with moderate disease and in those who are carriers of a gene known as ApoE4 that raises the risk of Alzheimer's. The company said it will continue to analyze results in these populations, but more trials would be needed to support the drug's approval.
An earlier study of the treatment released last summer showed the drug help stabilize the disease in four patients for at least three years, raising hope that the drug from Baxter International Inc will prove effective in larger trials. Most Alzheimer's patients typically decline over three to six months.
There are no licensed drugs that can slow the progression of Alzheimer's, and currently approved medications only treat symptoms.
Shares of Baxter fell 3.29 percent, or $3.32, to $67.99 in morning trading on the New York Stock Exchange.
Gammagard was the only remaining drug in late-stage development for Alzheimer's, a brain-wasting disease that slowly robs patients of their ability to think and care for themselves.
After 18 months of treatment, patients with mild to moderate Alzheimer's disease taking the drug failed to show a significant benefit on scales of cognitive decline and functional ability compared with those taking a placebo, missing the study's two main goals.
Dr. Norman Relkin of Weill Cornell Medical College, who led the study, said in a telephone interview that were "some significant findings" in another dementia screening test known as the modified mini-mental state in a subgroup of patients who were ApoE4 carriers.
"There were also trends of significance looking at patients with moderate versus mild disease," he said.
Relkin said the study reflects a "very different type of result" than seen in most other phase 3 trials of immunotherapies, including results of Eli Lilly & Co's treatment solanezumab and Pfizer and Johnson & Johnson's bapineuzumab, both of which seemed to show an effect in patients with mild disease.
However, none of the secondary endpoints in these groups showed a statistically significant difference. Relkin said the results are worth further study.
Based on the results, Baxter will reconsider its Alzheimer's program and will determine next steps after full data analyses, it said in a statement on Tuesday. The company said it is not changing its financial guidance for 2013.
"We are currently re-evaluating our approach," Ludwig Hantson, president of Baxter's bioscience business, said on a conference call. Hantson said the company will present full data from the study at the Alzheimer's Association International Conference in July in Boston.
"While the headline is disappointing, we believe expectations were low, and this may prove a clearing event for the stock," said BMO analyst Joanne Wuensch in a note to investors.
Although there was no response to the drug at the lower 200 mg dose, Wuensch said the full results may show whether there was any response the higher, 400 mg dose.
Baxter said it was likely to make a decision about moving forward by year's end.
Gammagard is an intravenous immune system treatment made from natural antibodies taken from young, healthy blood donors. Known generically as intravenous immunoglobulin, or IVIG, the therapy is typically used to fight infections in patients with weakened immune systems.
In the trials, there were 17 serious adverse reactions considered to be treatment-related in the study, but Hantson said the study was generally well tolerated.
Alzheimer's is the most common form of dementia and the sixth leading cause of death in the United States. An estimated 5 million Americans are believed to have the disease. An estimated 38 million people worldwide are believed to have dementia, including Alzheimer's disease.