Please ensure Javascript is enabled for purposes of website accessibility

Here's What's Causing Investors to Sell La Jolla Pharmaceutical Shares Today

By Todd Campbell - Updated Dec 8, 2017 at 1:55PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company's making progress toward an FDA decision on its lead drug candidate, but that's not enough to keep investors happy.

What happened

After industry watchers at J.P. Morgan downgraded shares to an underweight rating, La Jolla Pharmaceutical Company (LJPC -1.21%) was nosediving 12.6% at 1 p.m. EST.

So what

La Jolla Pharmaceutical reported positive phase 3 results earlier this year for LJPC-501, a drug that may help people suffering from a life-threatening drop in blood pressure. The company followed up that news with a filing for approval from the U.S. Food and Drug Administration; a decision is expected on Feb. 28, 2018.

A man starting at a chart showing a declining stock price holds his head in his hands

IMAGE SOURCE: GETTY IMAGES.

The upcoming decision by the FDA offers a catalyst that could be meaningful for La Jolla, but there's no guarantee that the FDA will approve LJPC-501 or that if it does, it will win widespread use by doctors. The binary risk associated with a decision on this drug makes owning shares ahead of the FDA decision a risky gamble.

Hesitation in warming up to La Jolla Pharmaceutical might be explained by the fact that during its phase 3 trials, LJPC-501 didn't deliver a statistically significant improvement in overall survival or reducing organ failure, a secondary endpoint. It did deliver on its primary endpoint, though. LJPC-501 successfully increased the proportion of patients achieving a mean arterial pressure of at least 75 mmHg, or a 10 mmHg increase from baseline, three hours following the initiation of treatment, without increasing the need for standard-of-care vasopressors.

Now what

It's never encouraging when analysts at respected firms recommend selling or underweighting shares, but investors should do their due diligence before jumping in or out of their shares. The upside is that an approval in February could provide some welcome revenue for the company. The downside is that absent an improvement in overall survival, it's anyone's guess how widespread the use of LJPC-501 could be if it's approved.

Overall, shock patients suffering from the condition LJPC-501 addresses have a 50% mortality rate, so there's a big need for treatment alternatives. It also shouldn't be ignored that the annual addressable market in the U.S. alone is in the hundreds of thousands of patients, many of whom don't respond to existing treatment approaches; that has some industry watchers thinking LJPC-501 could generate significant sales. Only time will tell if the bulls or bears are right on this one, but most investors should probably watch how this plays out from the sidelines for now.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

La Jolla Pharmaceutical Company Stock Quote
La Jolla Pharmaceutical Company
LJPC
$3.28 (-1.21%) $0.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
319%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.