What: Shares of the small cap biotherapeutic company Vital Therapies (NASDAQ: VTL) gained more than 90% last month (although it's given back some of those gains since then -- now trading at around $7.50 per share), according to data from S&P Capital IQ. This rally was triggered by the company's announcement that it is planning a new late-stage study for its extracorporeal liver-assist device (ELAD) that's designed to help improve outcomes in patients with acute liver failure. This new trial will be dubbed "VTL-308" and is expected to started enrolling patients in the first half of next year, depending on the feedback from the U.S. Food and Drug Administration regarding the trial's proposed design.
So what: The ELAD system already flunked a pivotal late-stage trial last August, causing Vital's shares to plummet. Most concerning is the fact that the device didn't show any benefit whatsoever in terms of extending survival among patients suffering from alcohol-induced liver decompensation. So, investors are obviously hoping the company can figure out what went wrong in this prior trial, and deliver a better result this time around.
Now what: Vital is expecting to hear back from the FDA before the end of the year about its plans to initiate another late-stage study, with this one targeting a subset of patients that appeared to benefit from the device in the previous trial. Even so, investors will probably want to remain cautious with this stock for moment, given that the impetus behind this new trial is a so-called post-hoc analysis performed on the data set from the earlier trial.
The bottom line is that post-hoc analyses in general are not particularly robust and can therefore produce misleading results. That's not to say that ELAD is destined to fail if this new trial gets the green light, but it's also hard to justify speculating on a clinical-stage biotech without solid evidence that's its flagship experimental product is likely to succeed in late-stage testing.
