Endocyte, Inc. (NASDAQ:ECYT)

CAPS Rating: 3 out of 5


Player Avatar zzlangerhans (99.85) Submitted: 4/26/2011 1:41:49 PM : Underperform Start Price: $12.73 ECYT Score: +11.31

I can't say I've researched this company exhaustively, but I find the huge bump today to be disproportionate to the catalyst.

Endocyte has completed the PRECEDENT phase II study of EC145 in platinum-resistant ovarian cancer, but has not publicly released the data. What they did announce was that they would seek a conditional approval of EC145 in Europe based on the unreleased results of the study, which they have simply stated showed an improvement in time to progression or death in the study arm versus standard of care. Traders are clearly interpreting this as an indication of strong positive data as evidenced by the greater than 30% bump in share price at mid-day.

I find this sequence of events unusual. I don't recall a previous instance of a company withholding topline data from the public but sharing it with a regulatory agency to support a marketing application. Seeking approval of a drug based on phase II data, even in a placebo-controlled study, is a risky strategy. The company has already designed a phase III study of EC145 called PROCEED.

Presumably the PRECEDENT data will be released for the first time at 2011 ASCO in early June. The stock might well continue to run ahead of ASCO. I'm terrible at calling tops on biotechs. But if the data doesn't turn out to show statistical significance or otherwise isn't as impressive as expected, the effects on the share price will be dramatic. Likewise, if the EMA chooses to decline EC145 based on phase II data, Endocyte will have to dig in for a multi-year phase III study.

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