Why Cytokinetics Stock Dropped on the Good News of an Upcoming Phase III Trial

September 2, 2016
By Mark Terry, BioSpace.com Breaking News Staff

Yesterday, South San Francisco’s Cytokinetics and Amgen announced that they were advancing omecamtiv mecarbil to Phase III clinical trials in the fourth quarter of this year. And surprisingly, Cytokinetics’ dropped from $12.07 on August 1 to today’s price of $10.53. The Motley Fool takes a look at why.

Omecamtiv mecarbil is a cardiac myosin activator that enhances cardiac function. It is being developed for treatment of chronic heart failure. The decision to move ahead with a Phase III trial came after results from a previous trial Phase II COSMIC-HF trial, and others.

“Progression of omecamtiv mecarbil to Phase III is a major milestone for our company as well as our collaboration with Amgen and reflects our collective commitment to the heart failure community,” said Robert Blum, Cytokinetics’ president and chief executive officer, in a statement. “We are pleased that the comprehensive clinical trials program that we have jointly conducted for omecamtiv mecarbil has contributed data that provide a compelling rationale to advance the development of our cardiac myosin activator to an international outcomes trial for the potential treatment of patients with chronic heart failure.”

Generally speaking, news like this would have investors being optimistic. And in fact, on September 1, Cytokinetics stock did rise more than 7 percent before it went into its plunge. Brian Orelli, writing for The Motley Fool, says, “Some of the decline is probably due to the typical sell-the-news traders. Even with the decline, Cytokinetics trades more than 60 percent higher than it did six months ago.”

The other possibility, he goes on to suggest, is that yesterday’s announcement didn’t mention a Food and Drug Administration (FDA) Special Protocol Assessment (SPA). Amgen had requested the SPA. An SPA is designed to let a company run or start a clinical trial without the concern that the FDA will have a problem with the trial design.

Orelli writes, “Not mentioning an SPA doesn’t mean that Amgen and Cytokinetics don’t have one, although it would be a little weird to leave it out of the press release. It’s also possible that the companies are working through the final details of an SPA with the FDA: the clinical trial isn’t scheduled to start until the fourth quarter.”

He does say not having an SPA isn’t the end of the world. “The potential uncertainty of what’s required for approval adds a little more risk,” Orelli writes, “but the companies have consulted with the FDA, so they’re certainly putting together the best possible design for a trial to get omecamtiv mecarbil approved.”

Orelli’s theory may be a little too “inside baseball” for some investors. TheStreet Ratings gave the stock a ratings score of D with a “sell,” saying, “The company’s weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and weak operating cash flow.”

So it’s possible the announcement just had investors taking a closer look at the company and finding other problems not necessarily associated with the good news of the advancing clinical trial.