It’s been a wild week for Idera Pharmaceuticals (IDRA). What started as a modest decline on March 19 after the stock bumped against its rising resistance level at about $6.85 a share turned into a blood bath on Monday when Summer Street Research Partners analysts expressed skepticism about the effectiveness of IMO-8400, the company’s lead therapy. Shares plummeted, and kept falling throughout the week. However, while Thursday brought more losses, it also brought an opinion from Piper Jaffray analysts that ran counter to Summer Street, calling the sell-off premature and overblown.
Now, for the time being at least, it appears as though Piper Jaffray had the right idea. The stock is up over 10 percent in early trading after the release of top-line data from its Phase 2 trial for IMO-8400 that appears to be broadly positive.
Shares gapped up 16.2 percent to $4.51 a share at the opening bell, fell sharply to just under $4.30 immediately afterwards, then quickly began a buying run that pushed the stock as high as $4.75 a share just before 10am ET, a 22.4 percent gain. The stock retreated again, though, falling back below its opening price as the morning wore on.
The phase 2 trial was a double-blind placebo controlled clinical trial involving 32 patients with moderate-to-severe plaque psoriasis. Idera’s IMO-8400 met both the primary objective of evaluating safety and tolerability for the drug, with no treatment related discontinuation and all patients being well tolerated, and its secondary objective of demonstrating clinical activity in patients with psoriasis.
“Successful completion of this trial is an important additional milestone in our TLR antagonist program. We have studied psoriasis as the initial disease indication to demonstrate clinical proof of concept for our TLR antagonists in autoimmune diseases,” said CEO Sudhir Agrawal, D. Phil. “With these data, we can now pursue our announced business strategy and advance our TLR antagonist drug candidates for the treatment of orphan diseases with high unmet medical need. Towards this goal, our clinical development strategy for IMO-8400 is focused on B-cell lymphomas harboring the MYD88 L265P mutation, and on orphan autoimmune disease indications. Over the remainder of 2014, we anticipate enrolling patients in IMO-8400 trials for Waldenström’s macroglobulinemia, diffuse large B-cell lymphoma and polymyositis and dermatomyositis.”
The treatment showed effectiveness and tolerability at three different dosing levels, giving Idera executives reason for optimism.
“We are very pleased to have met the goals of this trial related to safety and tolerability over three months of dosing, and to have obtained evidence of clinical activity with IMO-8400 in psoriasis patients. This provides further validation of the scientific rationale of blocking over-activation of specific TLRs,” said Senior VP and CMO Lou Brenner, 41M.D. “These data also support our clinical development plans for IMO-8400 in genetically defined forms of B-cell lymphoma and orphan autoimmune diseases.”
However, Summer Street analysts appeared to double down on their initial claims about IMO-8400. Analyst Bart Classen observed that did not mention a dosing effect in the recently-released data, something he considered surprising given it was a dosing study and some patients had very low doses.
The day’s gains may also have generated some interesting technical factors for Idera’s stock. While the release of clinical data is clearly what’s fueling the day’s movement, these other factors could be contributing to the strength of the rebound.
The stock has shown a 14-day stochastic RSI below 0.20 since plunging on Monday, a sign that it’s oversold. And as of yesterday’s losses, the 14-day RSI had also dropped below 30, another sign recognized by traders that the stock is oversold. What’s more, Friday’s gains resulted in the signal line crossing the MACD, which is considered a buy sign.
Finally, the fact that the stock bottomed out at just under $3.70 could show the formation of a rising support line at just under $4 a share based on a hard bounce there in late January. This would play against a clearly defined rising resistance line that’s appeared to cap gains since early September of last year. However, given that this supposed support line would be based on only two bounces, one of which corresponds with the release of positive clinical data, it’s hard to place all that much reliance in it.
Editor's note: this article had previously referred to Summer Street Research Partners as Summer Street Capital Partners, a separate and unafilliated company. It has been edited to correct this mistake.