Take Long View

What: Shares of Tetraphase Pharmaceuticals (NASDAQ:TTPH), a clinical stage biopharmaceutical company with a focus on creating antibiotics for drug-resistant bacteria, shed more than 78% of its value today on huge trading volume after the company released disappointing clinical news related to its lead product candidate. 

So what: The company announced that its Phase 3 IGNITE2 clinical trail, which was testing its flagship drug eravacycline's ability to treat complicated urinary tract infections, failed to meet its primary endpoint. The study showed that the experimental antibiotic failed to show show statistically significant non-inferiority when compared to levofloxacin, a currently available generic antibiotic. 

Guy Macdonald, Tetraphase's President and CEO, released this statement in the reported results: 

"We are disappointed that the IGNITE2 trial did not achieve its primary endpoint. We plan to further analyze the data and provide an update after we have discussed the data and our plans for a path forward with the regulatory agencies... We continue to believe that eravacycline can benefit patients with serious infections, particularly those caused by difficult-to-treat Gram-negative bacteria" 

Now what: As eravacycline is the company's only product candidate that is beyond the preclinical stage, it is no surprise to see that the market reacted so violently to the news released today.

Pipeline

Source: Tetraphase

This share price movement today should act as a reminder to all small-cap biopharmaceutical investors that bad things can happen to a company at any time, even when its lead product candidate holds huge promise, and that a company's share price can evaporate based on negative clinical news. Given the uncertainty about the future of this company's pipeline, I wouldn't look at this huge drop as a buying opportunity, and I think investors would be wise to look elsewhere for investment opportunities.

 

Brian Feroldi has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.