Opexa Therapeutics Inc (NASDAQ: OPXA)

Investors in Opexa Therapeutics were crushed on Friday, with the stock tumbling more than 69% on enormous volume, settling at $1.05 a share, a level not seen since the company implemented a 1:8 reverse stock split in 2015. Incidentally, the volume traded on Friday is roughly equal to the entire public float of 6.8 million shares, a certain indication that investors have fled OPXA en masse.

Opexa Misses Primary Endpoints In SPMS Trial

For OPXA investors, this may very well begin the death knell for the stock. To be sure, its never an easy topic to cover when promising therapeutic treatments for debilitating diseases miss the cut. For patients stricken with Secondary Progressive Multiple Sclerosis, the setback is disheartening.

In a press release on October 28th, OPXA stated that the phase 2b Abili-T clinical trial designed to evaluate efficacy and safety of Tcelna® in patients with SPMS did not meet its primary endpoint of reduction in brain volume change, nor did it meet its secondary endpoint of reduction of the rate of sustained disease progression. Although Tcelna did exhibit a favorable safety and tolerability profile, it likely will not be enough of an interest to spark future study of the drug.

The impact of the trial failure leaves OPXA unable to capitalize on an estimated $7 billion dollar MS market, and they will likely lose the trial relationship with Merck Serono who had an option and license agreement to advance Tcelna through a phase III trial.

Can Opexa Survive?

OPXA management is now in the unenviable position to evaluate all clinical options available for the drug, enact a crucial cash preservation plan, and consider the strategic options available to keep the company acting as a viable entity in the future.

The news acts as a double whammy for OPXA shareholders, whose shares were diluted by 96% last year as a result of a reverse split, coupled with the 69% decline on Friday. Based on pre-split prices, an investment of $1000 dollars in September of 2015 would be worth approximately $47 dollars today.

For the quarter ending June 30th, OPXA had approximately $7.8 million dollars in cash and cash equivalents on hand and were burning roughly $2.7 million per quarter during that same period. Extrapolating that down, OPXA should be holding on to roughly $4 million dollars today.

Given the weak tone and guidance by OPXA management on Friday, the company appears to be rudderless as it evaluates options, and, with no emerging clinical candidate to market to interested investors, Opexa might be left to wind down operations and leave the scraps to a company like Merck, who might be able to salvage at least some of the safety and tolerability data for future studies. At best, though, the value to OPXA stock will be minimal.

What now For OPXA Shareholders?

While investors were enjoying the most recent YTD gains of over 20% in OPXA stock, investors are now left holding a bag of shares that have lost over 80% of their value from the 52-week high and have a high probability of trending lower.

For investors looking for a bounce in the stock, the chances are small. However painful it might be to sell at these prices, investors should evaluate the odds of an interested suitor paying more than current value for the stock and determine if selling at an 80% loss is better than a total loss.

Trading in small and emerging biotech companies is a boom or bust proposition. Unless you manage an ETF that has a diversified portfolio of small and emerging companies like OPXA, holding stock in more than a small handful of single product biotech companies is uber-risky. For the average retail investor, landing on a star without first stopping on the moon is a long shot, and the level of due diligence required before building an entire portfolio of speculative biotech stocks is a lengthy process.

Without a doubt, companies like Opexa hold tremendous value in the development process for drug's seeking to treat and cure rare and debilitating disease. Now that large pharmaceuticals have become more likely to acquire companies that are initiating these important studies rather than work to develop products on their own, opportunities will always exist for the speculative and aggressive biotech investor.

The lesson from OPXA is for investors to maintain a close eye on the study results and be sure to read between the lines of interim results. In more cases than not, clues exist within the entire set of published data, most of which are not included in the press release headline.

Like any long shot, hitting on a biotech stock that delivers a cure or treatment can return huge percentage gains and has the opportunity to balance out the losses on the ones that failed. Be careful though; unfortunately, there are a lot more OPXA outcomes than there are winners.

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