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Why Adagio Therapeutics Stock Is Crashing Today

By Keith Speights – Dec 14, 2021 at 11:16AM

Key Points

  • Adagio announced that its antibody therapy ADG20 was much less effective against the omicron variant than previously reported.
  • The company is working to determine a potential path forward for ADG20.
  • With the rapid global spread of omicron, the prospects for ADG20 don't look good.

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The company's lead candidate appears to be ineffective against the omicron variant.

What happened

Shares of Adagio Therapeutics (IVVD -8.39%) had crashed 77.9% as of 10:58 a.m. ET on Tuesday. The huge decline came after the company announced that its experimental antibody therapy ADG20 was essentially ineffective in neutralizing the coronavirus omicron variant. Adagio stated that its latest in-vitro data showed a more than 300-fold reduction in neutralizing activity of ADG20 against the Omicron variant compared to an earlier report.

So what

Today's sell-off of the biotech stock was warranted. ADG20 is Adagio's only pipeline candidate in clinical testing. Now, though, the company plans to pause enrollment of patients in its phase 2/3 study being conducted in South Africa. The omicron variant is already the dominant strain in that country.

Scientists with concerned expressions on their faces.

Image source: Getty Images.

CEO Tillman Gerngross stated in the company's press release, "The continued prevalence of the delta variant in the U.S. and other countries, evolution of SARS-CoV-2 variants and potential future coronaviruses means a multitude of therapies and approaches are needed." But Gerngross might be overly optimistic about the prospects for ADG20.

The main problem for Adagio is that the omicron variant could become the most prevalent coronavirus strain across the world in a relatively short period of time. Omicron is spreading so rapidly in the United Kingdom that it's expected to become the dominant strain there within a matter of hours. The World Health Organization warned earlier this week that the omicron variant will likely move past the delta variant in countries where both strains are present.

Now what

Adagio said that it's continuing to perform analysis to determine the best path forward for ADG20. The company still hopes that it could be a prophylactic and treatment alternative for COVID-19. But with the omicron variant quickly spreading, those hopes could grow dimmer over the coming weeks.

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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