What happened

MacroGenics (NASDAQ:MGNX) shares are falling 17.3% as of 12:15 p.m. EST on Friday. The drop coincides with the release of the company's presentations at the annual American Society of Clinical Oncology meeting, and it follows a surge in its share price earlier this month.

So what

The ASCO conference is highly anticipated, and historically, investors have bought shares in stocks presenting at the conference ahead of time, hoping for a short-term pop. That strategy worked out well for investors in MacroGenics, which saw its share price triple in the past month because of positive news regarding its lead drug candidate, margetuximab, and promising data for MGD013 and MGC018 reported in its ASCO abstracts on May 11.

An upward arrow with a break in it that causes it to turn lower


On May 5, the biotech company said final overall survival (OS) data for its phase 3 SOPHIA study of margetuximab in HER2-positive metastatic breast cancer will be reported this year, and it anticipates a Food and Drug Administration go/no-go decision based on previously reported progression-free survival data in December 2020.

That news, which sent shares skyrocketing 231% on May 6th, was followed a week later by abstracts highlighting promising efficacy to be presented at ASCO for two earlier-stage drugs in its pipeline. The abstract for MGD013, an anti-Lag3 & PD-1 bispecific monoclonal antibody in phase 1 trials for metastatic breast cancer, showed a 40% overall response rate in HER2+ solid-tumor patients also taking margetuximab. Separately, the abstract for MGC018, an anti-B7-H3 antibody drug conjugate, showed that it reduced prostate-specific antigen, or PSA, by over 50% in five of seven patients with metastatic castration-resistant prostate cancer.

Now what

The absence of significantly different data in the official presentations at ASCO suggest that today's drop in MacroGenics shares is a classic example of "sell the news." Investors can't be blamed for pocketing some of their profit given how much shares are up this month; however, today's drop could be a good time for long-term, risk-tolerant biotech investors to buy shares.

On May 28, the FDA said it doesn't plan on convening an advisory committee to weigh in on margetuximab prior to making its decision, suggesting an OK may be coming later this year. Because margetuximab is a reengineered version of the blockbuster drug Herceptin, and it outperformed Herceptin in PFS, it could be a top seller if it nabs approval, especially if overall survival data impresses later this year. The intriguing early-stage data for MGD013 and MGC018 also shows that MacroGenics has other drugs targeting big indications in the wings, making the company more attractive.

Nevertheless, since we could get a disappointing read-out on margetuximab's overall survival, and there's always the risk of an FDA rejection, this company is best suited for investors who can tolerate a lot of risk.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.