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Why Takeda Pharmaceutical Stock Is Down More Than 10% Today

By James Brumley – Oct 6, 2021 at 3:54PM

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The prescription drugmaker is halting a trial before a scheduled stopping point, suggesting it's too dangerous to expect an approval.

What happened

Shares of Japanese pharmaceutical company Takeda Pharmaceutical (TAK 0.94%) were down by more than 10% as Wednesday's closing bell neared, following the company's decision to prematurely stop a key drug trial due to safety concerns.

So what

The drug in question is TAK-994, in phase 2 trials as a treatment for two different types of narcolepsy. Takeda did not offer details on the dangers linked to the therapy, limiting its explanation to "a safety signal has emerged in phase 2 studies of TAK-994." But clearly it's concerning enough to prompt an abrupt end to the trial.

Falling digital stock chart.

Image source: Getty Images.

The company is still weighing the net risks and benefits of the drug, which had been named a breakthrough therapy by the Food and Drug Administration in July. Despite the need implied by the FDA's designation, however, the sudden decision to discontinue patient enrollment in the program does not bode well for TAK-994.

Now what

It's a grave disappointment, although not necessarily a surprising one. Takeda Pharmaceutical have been losing ground since 2018, with Wednesday's setback only making up a part of the stock's 16% sell-off since mid-September, the 25% tumble from March's high, and the halving since early 2018's peak.

Yet TAK-994 was also a win that Takeda Pharmaceutical needed. Market research outfit GlobalData at one point estimated the drug would reach annual sales of more than $650 million by 2027 due to the underlying need and limited competition. Now that call is completely in question.

Still, after a lengthy streak of poor performance that set the stage for today's move to multi-month lows, this might be a buying opportunity for speculators who can stomach the risk. Takeda did $28 billion worth of business last fiscal year, turning roughly $9 billion of that into an operating profit. The numbers mirror the previous year's sales and earnings. The company's 2030 top-line goal is $47 billion, which can still happen with or without the approval of TAK-994 in the meantime.

Traders have certainly taken on riskier bets.

James Brumley 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.

Stocks Mentioned

Takeda Pharmaceutical Company Stock Quote
Takeda Pharmaceutical Company
TAK
$14.98 (0.94%) $0.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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