Sweden's Karo Bio has pulled the plug on its late-stage cholesterol compound eprotirome and abandoned plans to spin off its preclinical operations.

The firm is terminating the Phase III programme on eprotirome, a thyroid hormone analogue which could lower ‘bad’ cholesterol levels in patients already taking statins, after an animal study demonstrated unwanted effects following long-term exposure. Specifically, damage to cartilage was seen in dogs that were given eprotirome for up to 12 months.

The cartilage damage was apparent only after a year's exposure and occurred in all animals treated with high doses but was also seen in the lower dose groups. The control animals displayed no damage.

Karo Bio said "these unexpected findings mean that it cannot be excluded that also humans may suffer from similar cartilage damage. Chronic treatment with eprotirome must therefore be considered as too risky in relation to the lipid-lowering effect that the current study intends to demonstrate".

Chief executive Per Bengtsson said that "eprotirome has been a project with great potential, but also a project with risks. Unfortunately, the risks associated with long term use do not outweigh the benefits [which is] why we are forced to make this difficult decision".

The company said that the total cost of eprotirome's Phase III programme, which was scheduled to run until 2014, was around 300 million Swedish kroner and it has already spent 100 million kroner, about $15 million. Karo Bio will take wind-up charges in the first quarter of around 55 million kroner and the firm has funds to last another year.

In November, Karo Bio said it would be laying off 25 of its 70 staff as it prepared to spin off its preclinical activities but the latter part of the plan has now been halted. The company says it has several development programmes "built on its knowledge of drug development based on nuclear receptors", notably one with Pfizer.

The pact with the US giant, signed in December, is focusing on finding drugs which target the RORgamma pathway to fight autoimmune diseases. During the first two years, the deal will provide Karo Bio with $10-14 million and revenues of up to $217 million, plus royalties.