Why OvaScience Inc. Shares Tumbled

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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 OvaScience Inc. (NASDAQ: OVAS  ) , a life sciences company focused on developing therapies to treat female infertility, plummeted as much as 36% after announcing the suspension of U.S. trials for its lead drug candidate, Augment, which is a drug designed to improve egg quality and increase the success of in vitro fertilization, in the United States.

So what: The reason behind the U.S. trial halt relates to an untitled letter received from the Food and Drug Administration. If you recall, an untitled letter is a notice of violations from the FDA, but not of the level of receiving a warning letter -- consider it a jumping-off point for discussion between the company and the FDA. According to the FDA's untitled letter, the agency is questioning the status of Augment as a 361 HCT/P (an FDA regulation governing human cells, tissues, and cellular and tissue-based products) and is advising OvaScience to file an investigational new drug application for the therapy. OvaScience also announced that it would be continuing its study outside the United States and anticipates discussing the FDA's Augment findings with the agency in the coming weeks.

Now what: As usual, now it's a watch-and-wait game for shareholders. Obviously, the U.S. represents a big market opportunity for OvaScience, so any delay in bringing this new drug candidate to market is bound to work against its share price. Then again, even with the delay, OvaScience's solution is still a remarkably easy fix -- simply file an IND for Augment and go through the motions as a worst-case scenario. Clearly not all hope is lost here, but I'd likely suggest sticking to the sidelines until after OvaScience and the FDA meet and discuss the FDA's concerns.

OvaScience has certainly presented itself as a day-trader's dream stock today. But, it also serves as a reminder that solid companies selling at depressed prices are what have consistently helped generations of the world's most successful investors preserve capital, minimize risk, and achieve long-term, market-trampling returns. For one such company, read our free report: "The One REMARKABLE Stock to Own Now." Just click here to get started.

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Related Tickers

9/28/2016 4:00 PM
OVAS $7.84 Down -0.13 +0.00%
OvaScience CAPS Rating: No stars