Novan, Inc (NOVN) Crushed on Weak Phase 3 News. Down Over 75%

Matthew Paul  |

Novn, Inc (NASDAQ: NOVN) was crushed January 27 on mixed results on their Phase 3 product candidate, SB204. The company closed yesterday at $18.08 and hit a low of $3.90 earlier this morning. There has been a massive selloff with over 6.2 million shares trading today. As investors continue to sift through the information (and the company’s other progressing products), the company is slowly recovering trading at $5.17.

Under the gun today is their SB204, an acne treatment. A nitric oxide based product, the Phase 3 trial intent-to-treat analysis demonstrated statistical significance at 95% on all three NI-AC302 endpoints, but only on one of the three endpoints in NI-AS301. The endpoints measured the absolute changes in inflammatory and non-inflammatory lesion counts and proportion of patients achieving success on the Investigator Global Assessment (a scale evaluation for plaque psoriasis severity in clinical trials). Success was defined as an improvement of at least two grades in the IGA score from baseline and an IGA score of 0 or 1, or “clear” or “almost clear.”

On the study, NOVN CEO Nathan Stasko said, “While we are pleased with the results of the NI-AC302 trial that met the regulatory requirement for statistically significant efficacy of SB204, we are disappointed with the discordant results of NI-AC301. Our team has not yet received the full data set and we intend to provide an update on the SB204 program after our complete analysis…despite these discordant results, we believe in the potential of nitric oxide’s multiple, well-documented mechanisms of action and the data we have recently generated for our SB206 anti-viral and SB414 anti-inflammatory product candidates.”

While the results for this Phase 3 trials we not what was expected, there is reason to be optimistic, as Stasko suggested. The results from NI-AS301 doesn’t necessarily mean the drug is dead, and Novan has other drugs that are progressing through their pipeline. They have two drugs that are in Phase 2 trials: SB206 to treat genital warts, and SB208 to treat onychomycosis. Because their IPO was in September they still have cash to continue as of now. But to raise additional capital the company will have to prove itself to investors. The company believes they have enough cash to continue throughout 2017 so there is still time.

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