This morning, it’s probably safe to say that Steve Cohen does NOT consider himself the luckiest man on earth.
In a stunning reversal of fortune, Cytokinetics (CYTK) has watched its stock plummet over 60 percent after an experimental treatment for amyotrophic lateral sclerosis(ALS), also known as Lou Gehrig’s disease, failed to slow progression of the disease as compared to Placebo.
"It appears that this is game over for this drug, at least in ALS," said Simos Simeonidis, an analyst for Cowen & Co.
This comes just four days after it was revealed that Steve Cohen’s Point72 Management, formerly known as SAC Capital, had acquired a 5.5 percent stake in the company.
Cytokinetics is focused on small-molecule treatments that affect muscles by targeting their cytoskeletons, which Cytokinetics’ website describes as “system of protein filaments in the cytoplasm of a eucaryotic cell that gives the cell a polarized shape and the capacity for directed movement.”
This most recent setback may be even more concerning for investors following the September revelation that omecamtiv mecarbil, a treatment to reduce shortness of breath in heart failure patients being developed in partnership with Amgen (AMGN) , had failed to produce desired results in a mid-stage trial.
The day also represents a major reversal for a stock that had seriously picked up steam in recent weeks. Cytokinetics, a favorite of many analysts, had benefited greatly from the recent bounce back for biotech stocks. From April 16 to yesterday, the stock had gained over 45 percent since bouncing off a support line at about $9 a share.
However, today’s losses would appear to shatter that support level entirely. Shares have traded in a relatively narrow range, gaping down 59.7 percent to $5.23 each at the opening bell, reaching a low of $4.88 apiece in early going, and consistently trading at just over $5 into the early afternoon.
Volume was extremely heavy, with nearly 12.5 million shares trading hands before 12:30 pm ET against an average daily volume of just 1.19 million. The day drops the market cap for small-cap company Cytokinetics to just over $180 million from over $465 million just yesterday.
For those who maintained a short position through the last two weeks of gains, today was likely a major vindication. And, while the second negative clinical outcome in a little over half a year is clearly the primary driving factor for the losses, the size of the decline may be stoked by some external factors.
The day finds markets down, with biotechs getting hit especially hard. Any traders making a momentum play on a biotech resurgence would likely be jumping ship anyway. What’s more, certain technical factors could also have pointed to Cytokinetics being overbought prior to the day’s news. Recent gains had pushed the stock’s 14-day RSI past the 70.0 level, and its 14-day stochastic RSI was trading over 0.80 since April 17.
On the whole, though, Cytokinetics appears to be facing a relatively uncertain future for its key technology, with failures for both of its key treatments coming in relatively close succession. A recovery in the long term will require significant reversals in clinical trials that would indicate the company is, in fact, on the path towards commercializing a product in the not-too-distant future.
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