Why Calithera Biosciences shares are plunging today

What happened?

Calithera Biosciences (CALA -0.81% ), a clinical-stage biotechnology company, reported Monday morning that telaglenastat, one of its lead pipeline candidates, failed in a clinical trial. As a result, investors sell shares of the company. As of 11:53 a.m. EST Monday, Calithera Biosciences stock was down 43% after falling 49.9% earlier in the day.

So what

The clinical trial in question investigated the efficacy of the combination of telaglenastat, an experimental cancer treatment, and cabozantinib, a cancer drug marketed by Exelixis, in patients with advanced or metastatic renal cell carcinoma (RCC). The primary endpoint of the study was improvement in progression-free survival (the time during and after treatment that the patient lives with cancer without experiencing worsening of symptoms), compared to treatment with cabozantinib Alone.

Unfortunately, the combination of telaglenastat and cabozantinib did not meet the primary endpoint of the study. As a result of this result, Calithera Biosciences will reduce its workforce by approximately 35% and focus its financial resources on other ongoing studies.

Image source: Getty Images.

Now what

Biotech companies spend millions of dollars developing new drugs, and it’s always disappointing when one of those drugs doesn’t prove effective in a clinical trial. This is all the more a setback as the company in question has no drugs on the market and does not generate any income, which is the case of Calithera Biosciences.

As the biotech company pursues several other tough targets, including cystic fibrosis, the drugmaker’s risk-reward profile didn’t seem compelling even before today’s news. In other words, it may be best for investors to stay a safe distance from this biotech stocks for the moment.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

Comments are closed.