Shares of Rafael Holdings (RFL 1.44%) are tanking after its subsidiary Rafael Pharmaceuticals reported disastrous news for its experimental new cancer therapy. Investors caught off guard by a pair of clinical trial failures have hammered the stock 80% lower as of 10:45 a.m. EDT on Thursday.
Rafael Holdings' collection of subsidiaries isn't nearly as impressive as the name implies. The holding company's mostly a run-of-the-mill clinical-stage biopharmaceutical company with a large preclinical operation. It also owns a modest collection of commercial real estate that generated $4 million in top-line revenue during the fiscal year ended July 31.
Revenue from commercial real estate wasn't enough to cover the research and development of Rafael Pharmaceuticals' lead candidate, CPI-613, as a potential new treatment for patients with leukemia and pancreatic cancer. After watching Rafael Holdings lose $24.5 million last year, investors were counting on a win from at least one of two phase 3 clinical trials that wrapped up recently.
The bottom fell out from under the stock this morning because CPI-613 didn't do anything to improve pancreatic cancer patients' chance of long-term survival. Rafael Holdings also told investors the data monitoring committee watching a phase 3 trial with leukemia patients recommended stopping early due to lack of efficacy.
Heavy losses associated with drug development left the company with just $12.9 million in cash, cash equivalents, and restricted cash at the end of July. Today's stock market beatdown would put Rafael Holdings in a tight spot if not for a share offering the company completed after reporting fiscal 2021 results. In August, the company was able to capitalize on its previously inflated stock price with a secondary share offering that raised about $99 million.
Rafael Holdings and Rafael Pharmaceuticals will work together to evaluate the data even though the CPI-613 program should probably end immediately. Overall survival among pancreatic cancer patients randomized to receive CPI-613 was 11.1 months compared with 11.7 months in the control arm.