What happened

The stock of Seelos Therapeutics (SEEL -4.22%), a clinical-stage biotech that focuses on central nervous system (CNS) afflictions, was hit with an over 24% sell-off on Monday. Seemingly positive clinical trial news was heavily tempered by an analyst downgrade.

So what

An open-label study of Seelos' SLS-002 drug aimed at treating acute suicidal ideation and behavior in patients suffering from major depressive disorder produced very promising results.

The company found that SLS-002 had a 76.5% response rate in its primary endpoint of notably reducing their baseline on the Montgomery-Asberg Depression Rating Scale (MADRS). That response rate was just under 93% for the secondary endpoint, which was a more modest MADRS reduction.

A medical professional using a microscope.

Image source: Getty Images.

In a press release, the biotech quoted its CEO Raj Mehra as saying this could mean that "SLS-002 [is] an ideal therapy for this large unmet need of acute suicidality in major depression."

Nevertheless, Roth Capital analyst Jonathan Aschoff downgraded both the target price and his recommendation on Seelos stock. The former is now $4 per share, from a previous $12, and for him the stock is now a neutral (formerly a buy). Aschoff feels that while the trial results are positive, he's concerned about SLS-002's performance in the study according to another scale that measures dissociation.

Now what

It should be stressed that this is an early-stage study (it involved only 17 participants), so more testing is required for SLS-002. Despite Aschoff's reservations these results are quite promising, but the more important research work is forthcoming.