Tau­Rx raised more than $225 mil­lion from some un­con­ven­tion­al fi­nanc­ing sources to back their big pair of Phase III stud­ies for a new drug to treat Alzheimer’s. And they trav­eled to the Alzheimer’s As­so­ci­a­tion’s con­fer­ence in Toron­to to ac­knowl­edge that the first study failed on both end­points.

But that’s not stop­ping the com­pa­ny from claim­ing a suc­cess.

Tau­Rx CEO Claude Wis­chik says that in­ves­ti­ga­tors tracked a pos­i­tive re­sponse in a sub­group of pa­tients tak­ing the tau in­hibitor LMTX as a monother­a­py. And while he con­cedes he has no firm idea why that group ben­e­fit­ed when most pa­tients tak­ing a com­bi­na­tion of the drug with stan­dard of care showed ab­solute­ly iden­ti­cal re­spons­es to the con­trol arm, Tau­Rx switched the end­points on their sec­ond Phase III study — just ahead of the da­ta lock — to the rel­a­tive­ly small num­ber of pa­tients on monother­a­py. And he says they came up with a pos­i­tive read­out that could pave the way to an ap­proval.

The tri­al re­sults, claims Wis­chik, are un­prece­dent­ed in demon­strat­ing an im­prove­ment on cog­ni­tion and func­tion for Alzheimer’s pa­tients.

“We have hit the pri­ma­ry end­points,” the CEO tells me. “Whether that will con­sti­tute ad­e­quate ev­i­dence for prod­uct ap­proval, we can’t say.”

In the first failed Phase III, Wis­chik says about 15% of the pa­tients in the study were on monother­a­py. In the sec­ond, it was 20% of the pa­tients. And while Wis­chik con­cedes that he’s bas­ing his claim on an analy­sis of a sub­group of pa­tients in both Phase II­Is, he goes on to re­ject the no­tion that it’s a sub­group analy­sis. Af­ter mov­ing the goal posts in the sec­ond study, he’s de­clar­ing a touch­down on the pri­ma­ry end­points for the new­ly switched fo­cus group of pa­tients.

Un­like sev­er­al of the most ad­vanced drugs in the clin­ic for Alzheimer’s fo­cused on amy­loid be­ta, Wis­chik has been an out­spo­ken sup­port­er of the tau the­o­ry, point­ing to a tox­ic clus­ter found in the brains of many pa­tients with the mem­o­ry eras­ing dis­ease. But his tau in­hibitor LMTX, in com­bi­na­tion with stan­dard ther­a­pies, failed to sep­a­rate out from the rate of de­cline in cog­ni­tion and func­tion tracked in the con­trol arm.

The da­ta backed up the com­pa­ny’s con­tention that tau is a “very promis­ing drug de­vel­op­ment path­way,” Wis­chik not­ed. But he al­so goes on to say that he doesn’t un­der­stand why the monother­a­py would work while the com­bo didn’t.

“It’s a weak­ness,” says Wis­chik, but not nec­es­sar­i­ly a fa­tal one.

If that con­fu­sion is shared by reg­u­la­tors, though, it could well scut­tle LMTX’s chances of any near-term ap­proval.

In case af­ter case, where a Phase III has end­ed in fail­ure on the pri­ma­ry end­points, the de­vel­op­er has had to go back to the draw­ing board and ei­ther de­sign a new pro­gram with back to back stud­ies, or throw in the tow­el.

In Eli Lil­ly’s case, that meant tak­ing years and hun­dreds of mil­lions of dol­lars to tack­le the amy­loid be­ta drug solanezum­ab again. Lil­ly al­so moved the goal posts, though, drop­ping func­tion as a pri­ma­ry end­point even though reg­u­la­tors are still in­sist­ing on see­ing clear ev­i­dence of ef­fi­ca­cy on cog­ni­tion and func­tion. Oth­ers, like Glax­o­SmithK­line, have walked away af­ter a fail­ure. In GSK’s case, their drug was picked up for $5 mil­lion by Ax­o­vant, which de­signed a new Phase III tri­al for a clear­ly de­fined sub­group. Alzheon is tak­ing much the same strat­e­gy.

“They can’t get it ap­proved with this,” says one de­vel­op­er ac­tive­ly en­gaged in the field.

In ad­di­tion to be­ing equal­ly puz­zled about the hy­poth­e­sis of why the drug would work in this one sub­group and not the rest, the de­vel­op­er not­ed that reg­u­la­tors would still in­sist on a new Phase III pro­gram be­fore al­low­ing any drug to be mar­ket­ed to a mass group of des­per­ate pa­tients.

The gold stan­dard in drug de­vel­op­ment re­mains a ran­dom­ized, con­trolled prospec­tive Phase III tri­al, and reg­u­la­tors are un­like­ly to start com­pro­mis­ing on that point now.

Based in Sin­ga­pore with re­search fa­cil­i­ties in Scot­land, Tau­Rx was al­ways the odd duck among the flock of com­pa­nies tack­ling Alzheimer’s. Un­con­ven­tion­al fi­nanc­ing from the Malaysian casi­no and re­sort op­er­a­tor Genting Group un­der­scored part of the unique pic­ture, and al­so rais­es ques­tions of how the com­pa­ny could go about fund­ing a new pair of Phase III stud­ies with 800 to 900 pa­tients, which could eas­i­ly cost an­oth­er $200 mil­lion.

Tau­Rx has raised ex­pec­ta­tions of a pos­si­ble IPO at some point, as com­pa­ny of­fi­cials say that the ab­sence of any drug that blunts Alzheimer’s could cre­ate an in­stant mar­ket worth $10 bil­lion a year for a pi­o­neer like it­self. But there have been plen­ty of oth­ers who tried the same thing, on­ly to be beat back in a decade of R&D ef­forts that have met with uni­ver­sal de­feat in the clin­ic over the past decade.