Two Pharmaceutical Stocks Plunged On Tuesday Here’s What Happened

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Two Pharmaceutical Stocks Plunged On Tuesday Here’s What Happened

Pharmaceutical stocks, particularly small and nano-cap companies that are still in a clinical testing phase, are considered to be a risky investment.

Tuesday’s trading session featured two prime examples that could serve as a warning to investors to be selective in their stock picking and to understand just how harsh one day’s worth of trading can be to their portfolio.

Dipexium Fails At A Clinical Study

Shares of Dipexium Pharmaceuticals (NASDAQ: DPRX), a nano-cap late-stage pharmaceutical company that focuses on the treatment of mild infections of diabetic foot ulcers, crashed more than 75 percent on Tuesday.

Dipexium announced ahead of the market open disappointing results from an ongoing clinical trial.

The company’s clinical trial consisted of testing its therapy called Locilex in patients with mild infections of diabetic foot ulcers.  The study failed to achieve its primary clinical endpoint of showing superiority versus other standardized wound care.

David P. Luci, President & CEO of Dipexium, stated, “Although we are disappointed with these results, we are continuing to evaluate the data and will consider potential regulatory pathways forward in other possible clinical indications based on an evaluation of all data emerging from the Phase 3 studies.”

WindTree Therapeutics: Cash Shortfall?

Windtree Therapeutics (NASDAQ: WINT), a biotechnology company that focuses on therapies for respiratory disease and other potential applications, saw its stock plunge by more than one quarter of its entire value on Tuesday.

Similar to Dipexium, Windtree announced after Monday’s market close disappointing results from an ongoing clinical trial.

Windtree has been exploring its aerosolized therapy called KL4 surfactant in non-human primates.  The study was designed to assess the distribution and deposition of the KL4 surfactant in the lung.

The study was successful in showing that the company’s aerosolized therapy can be delivered throughout all regions of the test subject’s lungs.

While the results were encouraging, many investors and traders may find the company’s supplementary regulatory filing to be of particular concern.

The company noted that a Phase 2b clinical trial will involve 240 premature infants and evaluate the safety and tolerability of its KL4 surfactant administered in two dose groups.  Top-line results are expected to be released in mid-year 2017.

However, the company added that it has sufficient cash available to support the ongoing trial, pay its debt service and fund operations through February 2017.  

Investors may be concerned that the company would need to raise capital through a potentially dilutive transaction to fund operation beyond February of next year.