What: 2015 was a rough year to be a shareholders of TetraPhase Pharmaceuticals (TTPH). All was going well until September when the company released disappointing clinical news related to its lead compound, causing shares to plug. They ended up losing 74% of their value during the year, according to data from S&P Capital IQ.
So what: It was results from the company's Phase 3 IGNITE2 clinical trial that did it in. The trial was testing the company's next generation antibiotic, called eravacycline, ability to treat complicated urinary tract infections. Although the drug performed well in earlier trials it was unable to show statistically significant non-inferiority when compared to levofloxacin, a currently available generic antibiotic.
Given that so much of this clinical-stage biopharma's value was tied to the future of eravacycline the news sent shareholders heading for the exits.
Now what: Sometimes bad things happen to even the most promising of clinical stage biopharma companies. Just asked shareholders of Chimerix (CMRX 3.39%), another company that had a dreadful year. Chimerix announced that its lead compound brincidofovir missed its primary endpoint in a Phase 3 study, causing shares to plunge 80% in a single day.
Stocks like Tetraphase Pharmaceuticals and Chimerix should act as a reminder to all small-cap biopharmaceutical investors they are taking huge risks and that bad things can happen to a company at any time. It's for that reason that I continue to believe that stocks like these should only represent a tiny amount of your total portfolio.
