Theravance Shares Got Crushed: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of biotech company Theravance (NAS: THRX) plummeted an ugly 32% today on serious safety concerns over its experimental lung drug Relovair, which it shares with GlaxoSmithKline (NYS: GSK) .

So what: Relovair was expected to be a blockbuster for Theravance, but mixed clinical trials, reports of "fatal pneumonia" in patients treated with the drug, and dimming prospects of a possible takeover are all working nicely to squash investor hopes. In fact, today's 30%-plus sell-off represents the biggest one-day loss in the company's history.

Now what: I wouldn't be so quick to buy into Theravance just yet. While Glaxo and Theravance will go ahead and seek approval of Relovair for use against chronic obstructive pulmonary disease, the two companies will obviously have to continue working with regulators about using the drug for asthma patients. Both management teams remain confident about their chances, but given Glaxo's large size and much more diversified revenue stream, it's probably the safer way to bet for most investors.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Glaxo. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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