Why Synta Pharmaceuticals Shares Sank

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Synta Pharmaceuticals (NASDAQ: SNTA  ) , a clinical-stage biopharmaceutical company focused on researching and developing cancer and chronic inflammatory therapies, fell as much as 17% following an analyst downgrade after Synta disclosed the departure of its president of research & development.

So what: Today was a double whammy for Synta. First, it received a downgrade by BMO Capital to "market perform" from "outperform" as the research firm cut its target in half to $9 from $18. The impetus to the downgrade, however, was an 8-K filed yesterday by Synta disclosing that Sumant Ramachandra had left his position as president of R&D for personal reasons less than two months after being hired.

Now what: As usual, I would take analyst actions with a grain of salt because they rarely have any bearing on the long-term investing thesis in a company. However, it always raises a caution flag when people are being hired and leaving positions of high importance in just a matter of weeks. With the company still purely in the clinical stage of its development, any disruption at the head of this division is bound to throw a monkey wrench into the engine. For now, I'd rather be an innocent bystander and stay on the sidelines than to try project where this highly volatile company may be headed next.

Craving more input? Start by adding Synta Pharmaceuticals to your free and personalized watchlist so you can keep up on the latest news with the company.

While you can certainly make huge gains in biotechs like Synta, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2414357, ~/Articles/ArticleHandler.aspx, 4/17/2014 12:09:50 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement