Tech and biotech stocks on the Nasdaq Stock Market have been taking a beating lately. Narrative-driven growth stocks have fallen out of favor since the start of last December due to the uncertainty created by sky-high inflation rates, the omicron variant, and the Federal Reserve's possible moves on the interest rate issue later this year. As a result, the impact of positive news on the share prices of pure-play growth stocks has been wildly unpredictable over the last few weeks. This head-scratching phenomenon has been especially pronounced among risky development biotech stocks.
Clinical-stage biotechs Cardiff Oncology (CRDF 0.23%) and Leap Therapeutics (LPTX 14.64%) are prime examples. After the closing bell yesterday, Cardiff and Leap both announced major updates for their lead anti-cancer assets. While both of these program updates were upbeat overall, this moody market saw fit to give Cardiff's share price a 25% haircut at its low point during extended trading Tuesday, while Leap's share price actually rose by as much as 17% in after-hours trading. Here are the key issues causing these two Nasdaq-listed cancer stocks to move in polar opposite directions.
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Cardiff: An ultra-demanding market
Cardiff's shares plunged in Tuesday's after-hours session following an update for its lead product candidate, onvansertib, as a treatment for patients with advanced KRAS-mutated metastatic colorectal cancer. A subset of these phase 1/2 data will reportedly be presented in poster format at the American Society of Clinical Oncology Gastrointestinal Cancers Symposium (ASCOGI) on Jan. 22.
The major highlight from this clinical update is that 34% of the patients treated per protocol and at the recommended phase 2 dose exhibited an initial complete or partial response (one complete response and 11 partial responses). Cardiff said in its press release that this initial objective response rate dramatically exceeds the historical norm for the current standard-of-care regimen.
Overall, these data appear to provide solid evidence that onvansertib confers a substantial clinical benefit to patients with advanced KRAS-mutated metastatic colorectal cancer. And Cardiff, for its part, believes that these data are indeed compelling enough to move forward with the drug's clinical program for this high-value indication.
However, the market clearly doesn't share management's optimism. Despite the dour reaction by investors, the fact of the matter is that a 34% objective response rate for this hard-to-treat indication isn't bad at all. In fact, onvansertib will likely be approved if it yields similar efficacy results in a phase 3 trial in this setting. That being said, the drug's safety profile will also have to be acceptable in order to gain market access.
So why is Cardiff's stock dropping on this fairly positive clinical update? Some investors were clearly banking on a quick buyout. The backstory is that Pfizer recently took out an equity stake in the biotech, a move which may be a prelude to a takeover at some point. Pfizer, though, is almost certainly going to wait for more data before pulling the trigger on a deal. Shareholders hoping for a quick buyout premium, in turn, are probably moving on to greener pastures in the wake of this data release.
Leap: A buyout might be in the cards
Leap's shares jumped by double digits in yesterday's extended trading session due to a positive clinical update for its novel stomach cancer drug candidate. Specifically, the company announced after the closing bell yesterday that its anti-Dickkopf-1 (DKK1) antibody DKN-01, when used in conjunction with BeiGene's anti–PD-1 monoclonal antibody tislelizumab, demonstrated encouraging clinical activity in both first- and second-line advanced gastric or gastroesophageal junction cancer patients.
The drug's updated trial data for gastric cancer is slated to be presented at ASCOGI later this week. As part of this forthcoming presentation, the company plans on holding a conference call on Jan. 21 to provide additional color on the drug's mid-stage gastric cancer trial.
What's the big deal? BeiGene reportedly owned 13.7% of Leap's outstanding shares during the third quarter of 2021, per whalewisdom.com. The Chinese biopharma, therefore, could decide to buy the rest of its partner if this high-value cancer drug advances into a registration-enabling trial. This possibility appears to be the key reason Leap's stock is moving higher in the midst of a rather harsh bear market.
