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Why Provention Bio Stock Crashed Today

By Keith Speights - May 28, 2021 at 4:18PM

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An FDA advisory committee vote was a lot closer than anticipated.

What happened

Shares of Provention Bio (PRVB -3.91%) crashed 28.8% as of the market close on Friday. The huge decline came after a U.S. Food and Drug Administration (FDA) advisory committee voted 10-7 in favor of recommending approval of teplizumab in delaying type 1 diabetes.

So what

Investors were clearly expecting a more lopsided vote for teplizumab after the FDA's briefing documents seemed quite positive about Provention's clinical data. Those documents stated that the company's TN-10 clinical study "successfully demonstrated the treatment effect of teplizumab in delaying T1D diagnosis." 

A person touching an end of a scale so that one side with a green figure shaped like a person is lower than the other side with a red figure shaped like a person.

Image source: Getty Images.

However, the FDA's Endocrinologic and Metabolic Drugs Advisory Committee wasn't as convinced about the experimental drug. Some of the committee members expressed reservations about the small size of the pivotal study conducted by Provention. They were also concerned that patients weren't followed after being diagnosed with type 1 diabetes.

It's possible that the relatively narrow vote increases the chances that teplizumab won't win FDA approval. However, the agency usually goes along with advisory committee recommendations.

Now what

What's next for the biotech stock? The FDA is scheduled to announce its decision on approval for teplizumab by July 2. 

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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