Morphic Therapeutic stock plummeted Monday after tests showed the company's ulcerative colitis drug underperformed a rival from Takeda Pharmaceutical. MORF stock has lost 55% over two days.
The company tested its drug, dubbed MORF-057, in patients with moderate to severe ulcerative colitis, a form of inflammatory bowel disease. After 12 weeks of treatment, 25.7% of patients who received the Morphic drug showed endoscopic improvement.
But that pales in comparison with the 41% endoscopic improvement shown by Takeda's Entyvio, RBC Capital Markets analyst Gregory Renza said in a note to clients.
The results, posted Friday, prompted a major sell-off. On Friday, MORF stock collapsed almost 29%. On today's stock market, shares continued diving, falling another 36.9% to close at 23.14.
MORF Stock Wipes Out Recent Gains
In April, Morphic said 25.7% of patients who received its ulcerative colitis treatment achieved clinical remission, the exact same proportion that showed endoscopic improvement. On the back of that news, Morphic announced a $240 million public offering. MORF stock also climbed 45% over two months.
All of that was wiped out on Friday and Monday.
Typically, the proportion of patients who show endoscopic improvement is bigger than those achieve clinical remission, RBC's Renza said. In the case of MORF-057, those numbers matched.
"Most inbound (questions) have skewed negative, raising questions on the disconnect between clinical remission and endoscopic change and the implausibility of all healers going into remission," he said.
But Renza kept his outperform rating on MORF stock. Morphic's pill could ultimately prove a competitive option in ulcerative colitis, he said. Further, Morphic could shed more light on the upcoming Emerald-2 study.
Shares Hit Eight-Month Low
Still, MORF stock fell to its lowest point since last October on the Emerald-1 results.
"While we understand the data inconsistency would warrant a move down to many, we also believe, with the data in context, the clinical profile of a competitive (inflammatory bowel disease) drug remains intact and that these current share levels present a buying opportunity while the debate rages on," Renza said.
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