When a small-cap biotechnology company announces a drug in development has met a Phase 3 endpoint, its stock gets a major boost. Conversely, when it announces a Phase 3 endpoint was not met, its stock gets clobbered. Versartis (VSAR 3.45, -18.15, -84.0%) did the latter and its stock is getting clobbered.
The damaging news from Versartis, which is an endocrine-focused biotechnology company that is developing somavaratan, a novel, long-acting form of recombinant growth hormone (rhGH) for growth hormone deficiency (GHD), came after Thursday's close.
Specifically, the company said its VELOCITY Phase 3 clinical trial of somavaratan in pediatric GHD did not meet its primary endpoint of non-inferiority.
The 12-month height velocity for the intent to treat population receiving somavaratan twice monthly was 9.44 cm, versus 10.70 cm for those receiving a daily injection of Pfizer's (PFE 35.97) drug Genotropin. Similarly, the 12-month height velocity for the per protocol patients receiving somavaratan twice monthly was 9.71 cm, versus 10.63 cm for those receiving Genotropin daily.
The promise of the somavaratan treatment, according to a Versartis 10-Q SEC filing, is that it would cut the need for daily treatment since it would require significantly fewer dosing events and injections.
From the business side of things, a somavaratan approval would have enabled Versartis to commercialize an rhGH product to compete with other marketed rhGH products that generated more than $3.0 billion in global annual sales in 2015 and are expected to top $4.0 billion in sales after the launch of long-lasting rhGH therapies. The pediatric GHD market has an existing market opportunity of approximately $1.5 billion, according to Versartis.
Versartis initiated an adult GHD Phase 2 trial in August 2015 and completed enrollment in that trial -- referred to as the VITAL trial -- in April 2016. There was no update on the VITAL trial in yesterday's announcement pertaining to the pediatric GHD study.
Versartis said it is looking at the results from the VELOCITY trial and working to gain a better understanding of the trial outcome. The company plans to provide a corporate update later this year, yet the update from the investment community today is clear.
Shares of VSAR are down 84.0% in pre-market trading, having been pressured further by a slate of downgrades from analysts following the company.