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Here's Why Rafael Holdings Is Plummeting Today

By Cory Renauer – Oct 28, 2021 at 11:46AM

Key Points

  • Today, investors learned that the lead candidate for Rafael Pharmaceuticals, CPI-613, failed to provide a survival benefit in not one but two clinical trials.
  • The data monitoring committee watching a phase 3 trial with CPI-613 and leukemia patients recommended the study end due to lack of efficacy.
  • Overall survival results in a phase 3 trial with pancreatic cancer patients were actually longer for trial participants who received standard care without CPI-613.

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A clinical trial failure with the company's lead candidate has investors running for the exits.

What happened

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.

So what 

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. 

Person leading a meeting and showing a declining chart.

Image source: Getty Images.

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.

Now what

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.

Cory Renauer 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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