XBiotech Plummets Over 60% After Discontinuation of Phase III Study, Here’s What You Need to Know

XBiotech Inc(NASDAQ: XBIT) shares were down over 60% today, after the company filed an SEC Form 8-K Filing shortly before the close. Now, the stock plummeted primarily due to its announcement of its discontinuation of its Phase III study for one of its drugs, which adds some uncertainty to the company’s revenues and earnings. That in mind, let’s take an in depth look at the catalyst, as well as statistics of XBIT.

XBIT Announced Discontinuation of Phase III Study

XBiotech Inc announced that an Independent Data Monitoring Committee (IDMC) performed its second unblinded analysis of the Phase III XCITE study for XBIT’s novel candidate antibody therapy for the treatment of colorectal cancer. Now, the IDMC did not have any safety concerns from this unblinded analysis. However, the IDMC did recommend the early termination of the Phase III study since the findings were not sufficient to meet the efficacy or threshold for continuation of the study.

In the company’s SEC Form 8-K filing, it noted, “Patients enrolled in the XCITE study were randomized 2:1 to receive Xilonix or placebo plus, in each case, best supportive care. Advanced colorectal cancer patients were required to have previous failed regimens that included flouropyrimidines, oxaliplatin, irinotecan, and Cetuximab (or Panitumumab for patients with KRAS mutation). Patients were expected to continue in the study until there was evidence of radiographic progression. The patients were to be followed for up to 18 months in order to determine overall survival. The primary endpoint of this study was overall survival, with secondary endpoints including objective response rate, progression free survival, change in lean body mass and patient reported quality of life measures.”

XBiotech Inc President and Chief Executive Officer John Simard stated, “We are obviously disappointed with these findings. In the coming weeks, the Company plans to analyze the data extensively to further understand the primary and secondary endpoint data, as well as to identify populations that may have benefited from the therapy. These findings today will not affect our efforts to pursue approval of the therapy based on the successful completion of the European study, which demonstrated control of debilitating symptoms in colorectal cancer.”

What You Need to Know About XBIT

  • XBIT shares closed down over 60% today, after the company announced its discontinuation of its Phase III XCITY study for colorectal cancer, based on IDMC’s second interim analysis.
  • XBiotech had 35.15M shares floating, 4.27M shares short and a short float of 12.15%, as of May 15, 2017, according to Morningstar.
  • As of June 8, 2017, XBIT shares were down over 30% over the past three months, and over 50% over the past year.

Here’s a look at XBiotech on the daily chart.

XBIT

Source: TradingView

Bull Case

After XBIT closed down over 60%, some traders might view this as a potential mean reversion trade. Consequently, that might be one reason why traders may look to get long. Moreover, the stock has been beaten down, and market participants might look for the stock to rebound, from a technical standpoint.

Bear Case

Now, there are a multitude of reasons why some traders may be short this stock. From a fundamental standpoint, the company discontinued its Phase III XCITY study treatment, and therefore, this caused some traders to be pessimistic on the company’s future revenues and earnings. Moreover, some traders may be looking at this as a momentum short, and looking for a sell off.

The Bottom Line

XBIT shares ended the day down over 60% due to a negative catalyst. The stock’s significant drop was attributed to its announcement of the discontinuation of its Phase III study of Xilonix in colorectal cancer patients. That in mind, there are still reasons why traders may be bullish and bearish on the name.

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