StemCells Inc. (NASDAQ:STEM)
On Tuesday May 31, 2016 shares of Stemcells fell by more than 83% after the company announced that it would completely stop its phase 2 Pathway study. The phase 2 study used Stem’s HuCNS-SC human neural stem cells to treat spinal cord injury. This was a huge shock for investors, because the company had reported earlier that patients treated with Stem’s therapy achieved improvement for their spinal cord injury.
The problem is that the short-term data didn’t translate the same in the long-term, over a 12-month period. The new data didn’t show an improvement for these patients, and the trial was stopped as it was shown that it wouldn’t achieve its clinical target even if the trial went to completion. The trial wasn’t stopped by Stem themselves, they had a committee, known as Interim Analysis Data Monitoring Committee which halted the trial. It determined that the data was not enough to continue on with the trial, even though data demonstrated minor improvements.
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With this disaster where does that leave current shareholders? The truth is that it leaves shareholders with pretty much nothing. Stem announced that it would sell assets, but a majority of the money would go to pay off debts first. Shareholders will be lucky if they receive anything if at all. What must really have shareholders upset is the fact that the company chose not to continue with other therapies. Normally when a biotech fails a trial it moves on to test other diseases with its drug.
Not in this case, because Stem announced that it would not raise additional capital, and instead would call it quits. As mentioned by Stem, it would wind down its operation. When a company says “wind down operations, that’s a nice way of saying that it will shut down the company for good. It is a huge shame that the company didn’t continue on and try to target other diseases. Before this failure in spinal cord injury, the company had a wet-age related macular degeneration program — Wet AMD. This program could have possibly added value over time. Now, investors must stay away from this company, because it has nothing of value left to offer.
Sarepta Therapeutics (SRPT)
On Thursday June 2, 2016 shares of Sarepta Therapeutics fell by 26% after the FDA had announced new rules for the compassionate use program. The compassionate use program allows patients to gain access to a drug that has not been approved by the FDA. The reason why the stock of Sarepta fell was because it was believed that the update in the program was being done to set up the denial of approval for Eteplirsen.
The head of the FDA, Janet Woodcock, was quick to deny that this program was being updated for Sarepta’s DMD drug. Of course, the head of the FDA wouldn’t admit such an action in the first place. But it is a huge coincidence that this compassionate use program was enacted one week after the FDA approval date for Eteplirsen was postponed. The FDA panel shot down the drug claiming that efficacy couldn’t be achieved with no placebo in the trial. It also didn’t like the fact that the company ran the trial with only a 12 patient population group.
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Typically, biotechnology companies must run a trial with at least 100 to 200 patients for a final trial to determine if a drug provides efficacy. Sarepta only using 12 patients is an extreme shortcut, and one which should not have been taken. Why would expanding the compassionate use rule be a big win for the FDA? That is because it could deny approval of Eteplirsen, and still look like a good guy. The FDA can just point to the compassionate use program when it is asked why it didn’t approve the drug. That means that the FDA has a win/win scenario.
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