Otonomy Inc (NASDAQ:OTIC)
Otonomy Inc (NASDAQ:OTIC) stock felt the market’s wrath after its novel treatment for Meniere’s disease, OTIVIDEX, failed to meet its primary endpoint in a Phase 3 clinical trial. Investors sent the stock tumbling 82.81% to lows of $3.45 following the disappointing clinical trial results.
The biopharmaceutical company shed more than80% of its market value after confirming it was suspending development of OTIVIDEX for chronic disorder of the inner ear. The stock registered a new 52-week low of $3.45 and is currently trading in a $3.45-$4.20 trading range.
Prior to the selloff, Otonomy Inc. (NASDAQ:OTIC) stock was trading over $20 a share as investors remained confident about OTIVIDEX prospects. The U.S. Food and Drug Administration (FDA) is yet to approve any drug for Meniere’s disease. Patients struggling with the chronic medical condition have to contend with compounded steroids to combat the effects of the disease.
Successful clinical trials could have exposed Otonomy Inc (NASDAQ:OTIC) stock to a $500 million market opportunity in the U.S. alone, according to Cowen & Co analyst Ken Cacciatore. The technology behind OTIVIDEX is currently in use in another ear infection drug that generated $300,000 in revenue for the company in the second quarter.
OTIVIDEX Phase 3 Trial Results
According to the biopharmaceutical company, OTIVIDEX therapy showed similar reductions in the number and severity of vertigo episodes compared to Placebo. The candidate drug missed its primary endpoint which was the count of definitive vertigo days. It also failed to meet its secondary goals.
“Based on these results, we are immediately suspending all development activities for OTIVIDEX including the ongoing AVERTS-2 trial. In addition, the company is undertaking a review of its product pipeline and commercial efforts to identify opportunities to extend its cash runway and build shareholder value,” said CEO, David Weber.
In the wake of the disappointing clinical trial results, Otonomy Inc (NASDAQ:OTIC) has withdrawn its spending guidance for the year as it moves to review its business. The company had a total of $150.5 million in cash and cash equivalent as of the end of the second quarter of which it planned to use between $80-85 million as operating expense.
The disappointing clinical trial results and the stock sell off wave has since evoked a wave of class action investigations from law firms. A number of law firms are currently investigating the company over possible violations of federal security laws.
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: Monica has an undergraduate degree in Accounting and an MBA she earned – with Honors. She has six years of experience in the financial markets and has been an analyst for the past two years.