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Vascular Biogenics Slumps 80% On Drug Failure – Is There Any Value Left Here?

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Updated 20 Jul 2022

Key points:

  • Vascular Biologics stock fell 80% on hte announcement of the failure of their ovarian cancer drug
  • The big question is is this a one drug failure, or an approach failure?
  • That is, do their other pipeline drugs still have promise or not?
  • key point

Vascular Biogenics (NASDAQ: VBLT) stock has fallen 80% premarket on the failure of the ovarian cancer drug it has in trials. As is usual in such cases of failures of late stage trials the big question is whether there's any value left at all. After all, it's cost a considerable sume to get this far and the failure means that there's a high probability that all that capital is just gone. So, is there anything left in VBLT that's worth anything? Sad, but it's got to be done, that's the calculation.

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The specific news is that Vascular Biogenics‘ treatment for platinum resistant ovarian cancer simply did not work “Trial Did Not Meet Statistical Significance on Improvement in Primary Endpoints of Progression Free Survival (PFS) or Overall Survival (OS)”. The basic message there is “No”. Also “Nope” and “Nada”. Which isn't quite what anyone wants to hear at this point.

This point being a long way down the road too, for this was a Phase III trial. Phase I is cheap enough, just show that the new drug or treatment doesn't immediately kill healthy people. Phase II usually deals with the issue of whether it treats the disease aimed at. Phase III refines that, plus looks for side effects that we might only see in a large sample. Phase III, precisely because of the requirement for a large sample, is the expensive part of this trial process. Failures in Phase III do indeed happen but it's not usually ineffectiveness that makes them do so, but side effects.

Vascular Biogenics Stock Price
Vascular Biogenics Stock Price from IG

Also Read: Five Best Phramaceutical Stocks To Watch in 2022

Some pharma stocks are one product companies. Some instead have a number of potential drugs even if they're working off a common base of either starting point or effects. Vascular Biologics is in that second group – there are other drugs in the pipeline. More, perhaps, to the point here VBLT in the same announcement points out that it has funding for the next 12 months of its program. There doesn't need to be – need note – an emergency fund raise to keep the company going.

The failure at this late stage is of course a blow. A very expensive blow as well. But that there is a pipeline means that there's still at least some option value to the stock. We are not likely to be seeing an immediate blowout here.

There is also the one final thing to think through. Cancer isn't really “cancer”, the one single thing. It's a vast collection of malignancies. We can't, and don't, therefore say that something that doesn't work on one cancer doesn't work upon any. But there has to be a suspicion that if an approach doesn't work on one cancer then it's less likely that the same approach won't work upon others.

So the true valuation of Vascular Biologics stock really comes down to this. Does the failure of the ovarian cancer treatment mean the entire approach has failed? Or is this one of those times when it only doesn't work on one type of cancer?