Ocera Therapeutics Inc (NASDAQ:OCRX) disclosed last week that its Phase 2b clinical trial, STOP-HE, assessing lead product candidate OCR-002 (ornithine phenylacetate) in hospitalized patients with hepatic encephalopathy (HE) failed to beat placebo as measured by the time to improvement in HE symptoms, the primary endpoint.

While the results were disappointing, Aegis analyst Difei Yang, sees clear reduction in plasma ammonia level with meaningful statistics. Arce also points out it’s clear from the data that the dose may not be optimized.

“We believe a clinical meaningful endpoint is still required with ammonia being a secondary end point. Two currently marketed drugs that could provide some perspective on potential regulatory pathway, Ravicti and Xifaxan. In the case of Ravicti, the trial relied on a primary end of non-inferiority to phenylbutyrate by evaluation of venous ammonia levels. And in the case of Xifaxan, PE was measured in time to first breakthrough overt HE episode,” Yang noted.

H.C. Wainwright analyst Ed Arce says that the trial was potentially too small to achieve statistical significance given that a larger trial is always more likely to hits its efficacy endpoints. In order to tease out the exact reasons for trial failure, Ocera expects to conduct exploratory analyses involving further statistical analyses of all three dose groups and plans to disclose the data in the upcoming months.

“While we are awaiting the results from the exploratory analyses confirming this observation, we believe that these results provide evidence of the drug’s effectiveness,” Arce stated.

Meanwhile, despite the setback, Ocera remains on track to meet with the FDA in 3Q17 to discuss the detailed results of STOP-HE, with the goal of planning the design of the Phase 3 program for intravenous OCR-002 for the treatment of acute HE.

“We believe an agreement with the FDA for a clear path forward (Phase 3) is a major risk-reducing event that may drive the shares substantially higher. Additional catalysts include initiation of Phase 2a study with optimized tablet formulation for the first half in 2017,” Arce wrote. 

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Ed Arce and Difei Yang have a yearly average return of 10.7% and 1.5% respectively. Arce has a success rate of 45% and is ranked #523 out of 4381 analysts, while Yang has a success rate of 41% and is ranked #1810.