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Why Calithera Biosciences Stock Is Plunging Today

By Prosper Junior Bakiny - Jan 4, 2021 at 12:15PM

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The company reported negative results from a clinical trial.

What happened?

Calithera Biosciences ( CALA -6.89% ), a clinical-stage biotech company, reported on Monday morning that telaglenastat, one of its leading pipeline candidates, flopped in a clinical trial. As a result, investors are selling-off shares of the company. As of 11:53 a.m. EST on Monday, Calithera Biosciences' stock is down by 43% after dropping by as much as 49.9% earlier today. 

So what

The clinical trial in question investigated the efficacy of the combination of telaglenastat, an experimental cancer treatment, and cabozantinib, a cancer drug marketed by Exelixis, on patients with advanced or metastatic renal cell carcinoma (RCC). The primary endpoint of the study was improvement in progression-free survival (the amount of time during and after treatment the patient lives with cancer without experiencing worsening symptoms), compared to treatment with cabozantinib alone.

Unfortunately, the combination of telaglenastat and cabozantinib didn't meet the primary endpoint of the study. As a result of this outcome, Calithera Biosciences will cut its workforce by about 35% and focus its financial resources on other ongoing studies.

Upside down piggy bank on a shelf.

Image source: Getty Images.

Now what

Biotech companies spend millions of dollars developing novel drugs, and it's always disappointing when one of these medicines fails to prove effective in a clinical trial. It's even more of a setback when the company in question doesn't have any drugs on the market and doesn't generate any revenue, which is the situation for Calithera Biosciences.

While the biotech company is going after several other difficult targets, including cystic fibrosis, the drugmaker's risk-reward profile didn't seem compelling even before today's news. In other words, it may be best for investors to stay a safe distance away from this biotech stock for now. 

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.

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Stocks Mentioned

Calithera Biosciences, Inc. Stock Quote
Calithera Biosciences, Inc.
CALA
$0.74 (-6.89%) $0.06
Exelixis, Inc. Stock Quote
Exelixis, Inc.
EXEL
$16.07 (-2.49%) $0.41

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