UPDATE 3-CollaGenex drug fails rosacea study, shares fall

(Adds analyst comment, updates shares)

By Ransdell Pierson

NEW YORK, Sept 26 (Reuters) - CollaGenex Pharmaceuticals Inc CGPI.O said on Wednesday it is ending development of its drug incyclinide for treating the inflammatory skin condition rosacea after a mid-stage trial found it ineffective, sending company's shares down 19 percent.

CollaGenex said in a release that patients given incyclinide in the rosacea trial "did not demonstrate a greater reduction in inflammatory lesions than the patients on placebo at any point during the study."

The company, which last year launched a leading treatment for rosacea called Oracea, had hoped incyclinide would prove to be more effective or have other advantages over the older treatment.

"We thought incyclinide might be a follow-up to Oracea, but clearly that will not be the case," given the negative findings of the Phase II study, CollaGenex Chief Executive Officer Colin Stewart said in an interview.

Instead, Stewart said the company would continue to develop incyclinide, a chemically modified member of the tetracycline family of antibiotics, as an acne treatment due to its effectiveness against that skin ailment in a separate trial earlier this year.

Rosacea, which causes symptoms like redness, bumps and pimple-like blemishes on the skin, is believed to be caused by inflammation and affect more than 14 million Americans.

The failed trial involved 197 patients with moderate to severe rosacea who were divided into four groups. One group was given placebo capsules, while patients in the other groups received either 5-, 10- or 20-milligram doses of incyclinide each day for 12 weeks.