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Here's Why Trevena Stock Dropped 18% Today

By George Budwell - May 16, 2016 at 3:09PM

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The biotech's experimental heart drug missed the mark.

What: Shares of the clinical-stage biotech Trevena (TRVN -5.80%) fell by as much as 18% today after the company announced that its experimental drug, TRV027, failed to meet either its primary or secondary endpoints in a mid-stage study for acute heart failure. 

So what: Trevena's nosedive illustrates just how nervous this market has become toward developmental biotechs in general. After all, Trevena is already trading at a tiny fraction of the latent value of its lead clinical candidate oliceridine (TRV130), indicated for acute pain. 

Now what: While this news is certainly disappointing, I think this double-digit drop is largely unwarranted due to the fact that oliceridine is currently entering two pivotal stage trials that are expected to produce top-line data early next year. The long and short of it is that Trevena has a decent shot at garnering its first regulatory approval in the not-so-distant future, especially in light of the drug's strong mid-stage results as a treatment for acute pain.

Aside from these upcoming clinical catalysts, investors should bear in mind that the acute pain market raked in $11 billion in sales in the U.S. in 2014, and there is a clear need for better treatment options. In other words, oliceridine is targeting a market that has the power to generate blockbuster-level sales figures. 

Now, oliceridine would likely face stiff competition from Pacira Pharmaceuticals' (PCRX -0.77%) Exparel at the onset of its commercial launch, and potentially from Heron Therapeutics' (HRTX -2.51%) experimental stage drug, HTX-011, later down the road. After all, Exparel's sales are growing by double-digits right now, and the drug is set to enter the lucrative oral surgery market soon. On the bright side, Heron's HTX-011 appears to be at least a couple of years away from a potential commercial launch, given that the drug is only now entering a diversity of mid-stage studies. 

At the end of the day, Trevena is undoubtedly a high-risk biotech play -- and its arguably even riskier following the failure of TRV027 in treating acute heart failure. That said, I think this small-cap biotech is worth keeping tabs on due to oliceridine's substantial value proposition.

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Stocks Mentioned

Trevena, Inc. Stock Quote
Trevena, Inc.
$0.39 (-5.80%) $0.02
Pacira BioSciences, Inc. Stock Quote
Pacira BioSciences, Inc.
$57.85 (-0.77%) $0.45
Heron Therapeutics, Inc. Stock Quote
Heron Therapeutics, Inc.
$2.72 (-2.51%) $0.07

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