Drug Stock Cut In Half by Dismal Trial Data

Celldex is spiraling after pulling the plug on its experimental breast cancer drug

Apr 16, 2018 at 9:55 AM
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Biopharmaceutical stock Alkermes Plc (NASDAQ:ALKS) is rallying this morning after the U.S. Food and Drug Administration (FDA) accepted the company's new drug application (NDA) for ALKS 5461, a treatment for major depressive disorder. The agency's decision to review the NDA reverses its rejection of the application earlier this month, when regulators said additional trials would be necessary to resubmit. However, Alkermes said today in a press release that the FDA's acceptance of ALKS 5461 for review required nothing further than the company's clarification on "certain aspects of the NDA submission."

That FDA rejection earlier this month had sparked a major bear gap for ALKS shares, which were down nearly 27% month-to-date through Friday's close. In early trading today, the shares have tacked on 6.6% to trade at $45.33 -- just north of their April 2 post-gap close at $45.23.

Despite the equity's struggles, calls are far and away the options of choice among short-term speculators. Schaeffer's put/call open interest ratio (SOIR) for ALKS stands at 0.18, in the 6th percentile of its annual range, as traders have opened more than five calls for every one put on the stock.

Elsewhere in the drug sector, Celldex Therapeutics (NASDAQ:CLDX) is getting hammered on the heels of dismal results from a mid-stage study of its experimental breast cancer drug, CDX-011. After the treatment failed to meet the trial's primary endpoint, the company is discontinuing development of the drug, and Celldex is now "evaluating [its] operational and workforce needs to extend our financial resources," per a company statement.

CLDX was already down 24.3% year-to-date entering today's session, with the shares guided consistently lower by resistance at their 20-day and 40-day moving averages. In the early minutes of today's session, the stock tanked 53.5% to trade at just $0.99 per share -- a new record low.

A round of negative analyst notes could further exacerbate the stock's decline. Among the six analysts tracking CLDX, four call it a "buy" or better, with not a single "sell" rating on the books. Plus, the average 12-month price target of $7.67 stands in territory the stock hasn't explored since March 2016. Any downgrades or price-target cuts from this group could spark fresh selling for Celldex in the days ahead.


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