Shares in Intercell have taken a hammering after partner Merck & Co terminated a Phase II/III trial of their Staphylococcus aureus vaccine V710, a move which is going to lead to job losses at the Austrian biotech.

The US major says that in April the independent data monitoring committee looking at the study said it had not met formal futility criteria and  recommended that enrollment in the trial be suspended pending completion by Merck of additional analyses on the benefits and risks of vaccination. That review suggests V710 is unlikely to demonstrate a statistically significant clinical benefit, plus there were safety concerns regarding overall mortality and multi-organ dysfunction that occurred with greater frequency in vaccine recipients, compared with placebo.

This is a major blow for Intercell as analysts had predicted V710 would be a blockbuster. S aureus is the most frequent cause of hospital-acquired infections and 50% of these strains, including methicillin-resistant S. aureus (MRSA) isolated in hospitals worldwide are resistant to multiple antibiotics. In addition to bloodstream infections with a mortality rate of up to 35%, infections of bone, heart and other inner organs lead to serious health complications, death and indeed economic burden.

The failure of V710 has forced Intercell to "renew strategy". The Vienna-headquartered firm says it intends to "strive for mid-term financial self-sustainability by continuation of recent cost containment and financial discipline". The company announced a restructuring last year but now adds that it intends to "further continue cost reductions leading to above 50% compared to 2010 by being a lean and consolidated organisation".

Chief executive Thomas Lingelbach  claimed the company is in "a difficult, but highly promising stage", but acknowledged that "the past year has been a tough year with high losses and a significant setback for us and our shareholders". However, he argues with further growth of Ixiaro/Jespect, the firm's Japanese encephalitis vaccine and "extensive scientific basis…I am convinced that we are well positioned for positive renewal.”

Others are not so sure and analysts at Jefferies issued a research note saying that it was "a significant setback for Intercell" as V710 was seen seen as "potential validation of the company's technology".