Shares of drug developer Neurocrine Biosciences Inc. lost nearly half their value Thursday, plunging to an eight-year low, after the Food and Drug Administration asked the company for additional data on its insomnia treatment candidate.
Shares of San Diego-based Neurocrine fell $5, or 48.8 percent, to $5.25, and hit a new 52-week low of $5.01 earlier in the session. That was the lowest level the stock has reached since Sept. 21, 1999, when Neurocrine shares traded at $4.94.
The FDA's request comes six months after the company resubmitted its application for 5-milligram and 10-milligram doses of the drug candidate, indiplon. In May 2006, the FDA denied the drug approval over issues with the 15-mg dose, which was expected to generate the bulk of Neurocrine's revenue after approval.
The new data request, also known as an "approvable letter," says the drug is approvable at the two doses, pending additional clinical trial and preclinical study data. But analysts expressed concern about whether the drug can get and FDA nod.
In a note to clients, ThinkEquity Partners analyst David Woodburn said the FDA action was beyond his expectations. He lowered the price target on Neurocrine's shares to $9 from $15.
"We believe the FDA's 'approvable' decision presents a significant setback to the indiplon program," said Woodburn. "Going forward, we expect investors to assign essentially zero value to the indiplon program, so we are removing any contribution from it in our valuation."
Morgan Stanley analyst Sapna Srivastava said the FDA action on indiplon "the final nail in the coffin towards its development" in a note to clients.
Srivastava maintained an "Underweight" rating on the stock, saying she expects shares to trade at or below $5.
"We maintain our rating as we see little reason to own the stock. We are unconvinced that pipeline assets have any potential to create value in the foreseeable future," said Srivastava.
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