Shares of Eleven Biotherapeutics fell to nearly zero on Monday after the company announced failed test results on a key drug.
In a statement Monday, the company said its lead drug candidate failed a Phase 3 study to treat moderate to severe dry eye disease.
The stock tumbled by more than 70% to around $US3.57 per share. It’s down 71% year-to-date, and 69% from its February 2014-IPO price.
Eleven’s market cap is currently at $US66 million.
CEO Abbie Celniker said: “We are disappointed that our Phase 3 study in dry eye disease did not meet its primary efficacy endpoints, but we are encouraged that we continue to see a favourable tolerability profile for EBI-005 [the drug.]”
The company said it will continue to develop the drug for unmet medical needs in allergic conjunctivitis, commonly known as pink eye.
“Based on these top-line results, the company does not see an immediate path forward for EBI-005 in dry eye disease, and we will not be initiating the second Phase 3 study of EBI-005 in dry eye disease that we had planned to start in the second half of this year.”
In its statement, the company noted it has about $US59 million of cash and cash equivalents, which it expects will see it through the second half of next year. Eleven has $US15 million in debt.
A 70% drop in one day is virtually unheard of for stocks in other sectors. Biotech investors, however, must understand that they are often taking a wild guess on whether a company’s drugs will pass the various trials required before a product makes it to pharmacy shelves.
And so, news like this is enough to spark a wild selloff, as a company’s future could hinge on one drug.
Here’s a chart showing the plunge on Monday.