Acorda Proves It Is Not Smart To Invest In Small Biotech
Shares of Acorda Therapeutics (ACOR) absolutely skyrocketed today, by more than 280% by day's end, after the company announced that its Multiple Sclerosis drug Fampridine-SR significantly increased walking speed in MS patients compared to those taking placebo.
MS is a debilitating neural condition where the protective myelin sheath surrounding neurons, the cells of the nervous system, degenerates and limits the neural network responsible for control of movement.
While the science is exciting and full of potential, it is the financial surprise that has taken center stage. How could a stock almost quadruple in price in just one day's trading? Wouldn't it suggest that Wallstreet tremendously missed the boat on this one? And if so, how could a whole bunch of industry analysts who follow clinical trials like teenagers pumping up a penny stock get caught by surprise?
There are a lot of questions that need answers, but let us start with this question; why has Acorda's share price been sliding over the last year? In fact, it was at an all-time low on Friday, the very last day of trading before the big news hit?
It seems Acorda has left a bad taste in the hungry mouths of investors from a couple of earlier setbacks. An earlier MS phase 2 trial showed poor results, while another phase 3 trial for spinal cord injuries had failed. Poor results and disappointments do not sit well with biotech investors. They are a sensitive bunch, quick to find another biotech stock du jour.
In addition, Pantheon International had begun selling off a large chunk of shares in Acorda over the last week of August. It seemed that the company's stock was headed to the land of no return. This land is currently being occupied by such former biotech stars as Alteon (ALT), Advanced Tissue Sciences (ATISZ), and Genta (GNTA). Although Genta has had some good news lately as a group of institutional investors placed $16 million in company stock, no doubt expecting a positive review by an FDA panel in October.
Looking at the former stars mentioned above one can see a pattern. Great hype, coupled with decent early clinical trials, and eventually fizzled down as late stage results disappointed and the ever restless biotech investors jumped over board.
So what was so different with Acorda that the trend was broken on Monday? Data re-analyzation of course! Acorda took another look at its clinical trial data, sliced and diced and came up with a surprising conclusion; the data looks good! It was a conclusion that surprised not only analysts and institutional investors, but also the company itself!
If the company's own scientists cannot accurately predict the outcome of trial results, or at least have some sort of idea as to whether the numbers would look positive or grim, then how can any investor justify placing hard earned money into the venture?
I pick on Acorda of course, but this is a common theme in biotechnology investing. It is a rarity to hit upon a diamond stock, the one which grows from a few scientists to a multi-billion dollar behemoth, even with sound and diligent research.
The very fact that shares of Acorda skyrocketed today proves investing in biotech is a volatile, unpredictable, and dangerous game. Why invest in phase 1 trials, when you can invest in phase 2? Why phase 2 when you can be only one step away in phase 3? And why invest in phase 3 when the final approval and marketing of a drug can still significanly bring great riches to a company and its investors?
What if the FDA calls for one further trial for Acorda's Fampridine-SR, or worse still, does not like the data, then what? I would hate to even imagine the result of such news.
Why not wait till the FDA gives its blessing, and the company ships its first boxes of Fampridine-SR before placing your hard earned money on the table?
Or how about an even more outrageous idea; try to invest in a company that has made a profit!
_
Shares of Acorda Therapeutics (ACOR) absolutely skyrocketed today, by more than 280% by day's end, after the company announced that its Multiple Sclerosis drug Fampridine-SR significantly increased walking speed in MS patients compared to those taking placebo.
MS is a debilitating neural condition where the protective myelin sheath surrounding neurons, the cells of the nervous system, degenerates and limits the neural network responsible for control of movement.
While the science is exciting and full of potential, it is the financial surprise that has taken center stage. How could a stock almost quadruple in price in just one day's trading? Wouldn't it suggest that Wallstreet tremendously missed the boat on this one? And if so, how could a whole bunch of industry analysts who follow clinical trials like teenagers pumping up a penny stock get caught by surprise?
There are a lot of questions that need answers, but let us start with this question; why has Acorda's share price been sliding over the last year? In fact, it was at an all-time low on Friday, the very last day of trading before the big news hit?
It seems Acorda has left a bad taste in the hungry mouths of investors from a couple of earlier setbacks. An earlier MS phase 2 trial showed poor results, while another phase 3 trial for spinal cord injuries had failed. Poor results and disappointments do not sit well with biotech investors. They are a sensitive bunch, quick to find another biotech stock du jour.
In addition, Pantheon International had begun selling off a large chunk of shares in Acorda over the last week of August. It seemed that the company's stock was headed to the land of no return. This land is currently being occupied by such former biotech stars as Alteon (ALT), Advanced Tissue Sciences (ATISZ), and Genta (GNTA). Although Genta has had some good news lately as a group of institutional investors placed $16 million in company stock, no doubt expecting a positive review by an FDA panel in October.
Looking at the former stars mentioned above one can see a pattern. Great hype, coupled with decent early clinical trials, and eventually fizzled down as late stage results disappointed and the ever restless biotech investors jumped over board.
So what was so different with Acorda that the trend was broken on Monday? Data re-analyzation of course! Acorda took another look at its clinical trial data, sliced and diced and came up with a surprising conclusion; the data looks good! It was a conclusion that surprised not only analysts and institutional investors, but also the company itself!
If the company's own scientists cannot accurately predict the outcome of trial results, or at least have some sort of idea as to whether the numbers would look positive or grim, then how can any investor justify placing hard earned money into the venture?
I pick on Acorda of course, but this is a common theme in biotechnology investing. It is a rarity to hit upon a diamond stock, the one which grows from a few scientists to a multi-billion dollar behemoth, even with sound and diligent research.
The very fact that shares of Acorda skyrocketed today proves investing in biotech is a volatile, unpredictable, and dangerous game. Why invest in phase 1 trials, when you can invest in phase 2? Why phase 2 when you can be only one step away in phase 3? And why invest in phase 3 when the final approval and marketing of a drug can still significanly bring great riches to a company and its investors?
What if the FDA calls for one further trial for Acorda's Fampridine-SR, or worse still, does not like the data, then what? I would hate to even imagine the result of such news.
Why not wait till the FDA gives its blessing, and the company ships its first boxes of Fampridine-SR before placing your hard earned money on the table?
Or how about an even more outrageous idea; try to invest in a company that has made a profit!
_
posted by Nico at
11:20 PM
1 Comments:
Well,
I don't like to comment or guess as to what the FDA will do. Those guys are as unpredictable as most risky biotech stocks.
You bring up a good point about the short time period of the trial. As I understand it, and I could be wrong, the trial was not set up to measure walking speed, rather the great results in walking speed were due to re-analyzation of a failed trial's data.
So maybe a well organized, longer trial set up to more accurately measure the effect of FAMP on motion could be necessary. But I am not sure what the FDA is thinking.
FAMP could very well be approved by the FDA, but is it worth the risk right now?
How much upside does Acorda stock still have?
What would happen if the news is bad?
$17 will probably be worth less than $7. Why $7, because insiders were buying up stock back in February at around $6.
Did you see insider activity lately during October? Most are selling huge numbers of shares. Why?
It does not have to necessarily mean that they expect the worst, but they probably don't think it's worth the risk at this point. I like to follow insiders very closely, after all, they run the company!
Right now, in my opinion, I would wait to get final approval, and re-evaluate the situation.
H.S. Ayoub
biohealthinvestor.com
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