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Why Versartis Inc.(NASDAQ:VSAR) Collapsed

Versartis Inc.(NASDAQ:VSAR)

Versartis Inc. (NASDAQ:VSAR)

Versartis Inc.(NASDAQ:VSAR) shed more than 87% of its market value after announcing that its novel treatment for growth hormone deficiency (GHD), did not meet primary endpoints in a Phase 3 trial.

Stock Performance

Versartis Inc. (NASDAQ:VSAR) is currently trading at multi-year lows after breaking a key support. Investor’s sentiments have turned sour following the disappointing clinical trial results seen by the stock registering a new 52-week low of $2.60 a share.

Versartis Inc.(NASDAQ:VSAR)
One month VSAR stock price chart

Investors had high hopes that Somavaratan would do better in the trials than existing treatment, Genotropin. However, the trial results indicate that the drug registered statistically significant inferiority thus the reason why Wall Street pushed the stock lower on huge volumes.

“We are very surprised and disappointed to learn the outcome of the VELOCITY trial. Somavaratan showed height velocity in the range we had hoped, but it was not sufficient to demonstrate non-inferiority in this trial,” stated Jay Shepard, President, and CEO of Versartis Inc. (NASDAQ:VSAR).

The disappointing results all but complicates the regulatory pathway for the novel treatment. However, the candidate drug was well tolerated with a much lower discontinuation rate than Genotropin. The trial did not register any safety concerns.

News of Versartis Inc. (NASDAQ:VSAR) disappointing trial results sent Ascendis Pharma A/S (NASDAQ:ASND) shares up by more than 20% as it is also developing a human growth hormone therapy for children. The pharmaceutical company is currently enrolling patients in a late-stage trial, ahead of two planned trials. Results from the proposed trials should be out in the second half of next year.

Versartis fate on Wall Street, following the disappointing growth hormone trial, hangs in the balance. Investors may have to wait a little bit longer as the company says it will issue a guidance later in the year in the wake of disappointing Somavaratan trial results.

Q2 Earnings

Versartis Inc. (NASDAQ:VSAR) has been under immense pressure in recent weeks especially after posting a wider than expected second-quarter net loss of (-$36.6) million compared to (-$22.1) million in Q2 2016. Operating expenses for the quarter, ended June 30, 2017, surged to $36.2 million from $22.3 million the prior year as research and development expenses nearly doubled to $28.6 million from $16.4 million posted last year.

Versartis exited Q2 with cash and cash equivalent of $143.4 million.

I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.

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About the author: Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading. Steve keeps his head in the game by looking for, and writing about, small companies that often get overlooked by the big investment firms.

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