Shares of Gossamer Bio (GOSS -7.41%) fell as much as 14.6% at the market open on Tuesday, then soared as much as 21.4% less than an hour later. The biotech stock was up by 6.7% as of 11:20 a.m. EDT.
Why such wild swings? Novartis (NVS -0.76%) announced that its experimental asthma drug fevipiprant failed to meet the primary endpoint in two late-stage clinical studies. Gossamer's lead pipeline candidate, GB001, is a DP2 antagonist like fevipiprant. Investors at first assumed that Novartis' failure could mean that Gossamer's drug is likely to flop as well. However, the immediate negative reaction gave way to optimism that Gossamer might be successful anyway -- and without having to face competition from Novartis.
It's quite possible that the reasons behind fevipiprant's failure could be applicable to Gossamer's prospects with GB001, but Novartis didn't provide any details in its third-quarter press release that mentioned the news about fevipiprant. Thus, there's not enough to go on to draw any firm conclusions about what Novartis' clinical failure means for Gossamer.
What is certain is that DP2 antagonists have a dismal track record so far. Amgen's DP2 antagonist vidupiprant wasn't successful in clinical testing. Neither was AstraZeneca's AZD1981.
Gossamer could have better prospects, though, by focusing on other endpoints in addition to forced expiratory volume in one second (FEV1), the endpoint used in other drugmakers' studies. With GB001, Gossamer is looking at a composite primary endpoint that includes changes in FEV1 along with several other factors.
Results from Gossamer's phase 2b study of GB001 in treating asthma won't be announced until the second half of 2020. The company also expects to report results from another phase 2 study of the drug in treating chronic rhinosinusitis in the second half of next year.
Investors in biotech stocks face a lot of uncertainty. Today's wild swings with Gossamer's share price underscore the especially high level of uncertainty associated with clinical-stage biotechs. Most investors will be better off staying on the sidelines with these volatile stocks.