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Why OncoMed Pharmaceuticals' Stock Crashed Today

By George Budwell – Jan 25, 2016 at 12:53PM

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The biotech's shares sank after independent investigators reported that the company's experimental pancreatic cancer drug appears destined to miss its study goals in an ongoing midstage trial.

What: Shares of OncoMed Pharmaceuticals (OMED), a clinical-stage biotech, dropped by more than 46% today on heavy volume after an independent data safety monitoring board reported that the company's midstage pancreatic cancer drug, tarextumab, doesn't appear to be effective, based on a preliminary interim analysis of the data. Specifically, the company said that patients receiving the drug weren't showing any benefit in terms of either progression-free survival or overall survival. 

So what: Tarextumab is being co-developed with GlaxoSmithKline (GSK -0.98%). At last count, OncoMed still had over $300 million in potential milestone payments that it could have landed for this indication, per its deal with Glaxo. After today's disappointing news, however, it appears that these back-end developmental payments are now off the table, along with a licensing deal. 

Now what: OncoMed is presently unblinding the trial to determine its game plan for tarextumab going forward. Having said that, investors shouldn't hold their breath in hopes of a stunning reversal. Pancreatic cancer, after all, is one of the most difficult malignancies to treat. That's why I'm still not willing to pull the trigger on this speculative biotech, even after this drastic decline in share price.

George Budwell 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.

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