What happened

The stock of Radius Health (RDUS 6.18%) is tumbling today after the company presented follow-up data for its experimental breast cancer treatment. Investors disappointed with the biopharmaceutical company's update pushed the stock 44.3% lower as of 12:44 p.m. ET on Wednesday.

So what 

Back in October, Radius stock shot up when the company told investors its elacestrant, a potential first-in-class selective estrogen receptor degrader (SERD), significantly reduced the risk of disease progression for advanced-stage breast cancer patients during the phase 3 Emerald trial.

Scientist looking down into a microscope.

Image source: Getty Images.

Investors were hoping a strong benefit was measured for all trial participants and not only patients with tumors that harbor estrogen receptor 1 (ESR1) mutations. The stock is tanking today because it looks like elacestrant's indication, if approved, will be limited to the smaller subgroup of ESR1-positive patients.

Now what

Treatment with elacestrant reduced patients' risk of disease progression by 30% compared to trial participants randomized to receive standard care. Among just the ESR1-positive patients, elacestrant reduced the risk of disease progression by 45% versus standard care.

At recent prices, Radius has a low $388 million market cap. That's less than half as much as the company was worth a couple of months ago. Even if we assume elacestrant will be limited to the ESR1-positive population, it looks like the market is underestimating its future sales potential.