Emisphere Technologies Inc. said its oral insulin product proved safe and effective among Type II diabetes patients in a trial, but investors were hoping for more definite information and sold off the shares.
Shares of the biopharmaceutical company plunged as much as 27% after the announcement. The stock rebounded recently to trade 11% lower, at $7.92 a share, with 5.9 million shares traded - more than 17 times the daily average.
Volatility in the trading of the company's stock has been exacerbated the large number of shares sold short.
Investors who "short" shares borrow them and sell them, betting the price will fall and they will be able to buy the shares back later at a lower price for return to the lender. In general, the higher the short interest, the more investors expect a downturn. Short positions rise in value as stocks fall, and vice versa.
As of Oct. 13, approximately 28% of the company's outstanding shares are sold short, according to the latest figures from Nasdaq. This was 13% rise from the previous month.
Tarrytown, N.Y.-based Emisphere on Monday said the trial was designed to assess the efficacy and safety of low and high doses of oral insulin tablets compared with a placebo among patients with Type II diabetes mellitus.
Emisphere said it recorded no significant adverse events during the study, which paid particular attention to concerns about hypoglycemia or excessively low blood sugar. It said a statistically significant number of patients lowered their Hemoglobin A1c levels, a measure of glucose control, by more than 1.1%, as compared to patients in the placebo group who were receiving a standard treatment.
The company said it observed a dose response for patients with the most debilitating conditions who required the largest doses of the standard metformin treatment.
"The important part to look at is that they saw statistical significance in the population with the most debilitating disease (and) highest doses. That's an important endpoint," said analyst Stephen Brozak of WBB Securities LLC. "But on the other side, the study did not have what some of the shorts were looking for: more news."
Brozak said the Phase II trial answered questions about safety but that the company would now need to focus on studying the effectiveness of different doses among different patient groups at various stages in the disease.
Brozak also pointed out that other novel insulin-delivery methods, such as pulmonary delivery, had suffered setbacks.
"We are very pleased with these study results," Emisphere Chairman and Chief Executive Michael Goldberg said during a conference call with analysts.
Goldberg said the company only recently gained access to the data and had more analyses to conduct. He said during a conference call that the company would now be able to focus on further safety and dosage objectives in future trials.
"What the market might be missing is that with all of this we were able to have a very significant effect," Goldberg said. "There was not a single patient in the placebo arm that had a drop greater than 1.1 [in HbA1c]."
Goldberg said the trial data might encourage doctors with sicker patients, those who could potentially demonstrate the most significant improvement from the oral treatment, to participate in future studies now that the drug had proven to have an effect.
Emisphere said the results also might help it find a major pharmaceutical company with which to partner for the oral treatment, which it hopes will allow patients to avoid frequent glucose monitoring and insulin titration.
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