Threshold Over the Edge

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Another day, another implosion from a development-stage drugmaker. Earlier this week, the dubious honor fell to Threshold Pharmaceuticals (Nasdaq: THLD) after it reported negative phase 3 clinical trial results for its lead cancer compound, glufosfamide.

Shares of Threshold were down more than 57% after the company announced that glufosfamide failed to show a statistically significant improvement versus standard of care in improving overall survival in patients with metastatic pancreatic cancer. As Threshold's management pointed out, there was a "trend towards efficacy," as the median survival of patients on the drug was 105 days vs. 84 days for patients not taking the drug, and the trial's p-value was 0.19. But compounds don't get approved with these types of results.

Threshold still has a few cards up its sleeve, as it is testing glufosfamide in other phase 2 trials for other cancers. Additionally, in December, it announced interim results from a phase 2 trial of glufosfamide that may be supporting evidence that the drug works synergistically with Eli Lilly's (NYSE: LLY) Gemzar in treating pancreatic cancer. But with no comparator standard of care arm, the trial's results are not easily interpretable. Longer-term data from this small trial will be available later this year as well.

An investment in Threshold at this point is really only about its cancer program, as its other compounds are years away from producing any sort of meaningful results. Right now, Threshold is barely trading above its net cash value, so if there is value in glufosfamide and its pipeline, then risk-loving investors willing to stand the odds of losing all their chips are getting Threshold's intellectual property for free. Whether it's worth more than that will be seen later on this year.

Eli Lilly is an Income Investor recommendation.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.