Why Ambit Biosciences Corp. Shares Were Crushed

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 Ambit Biosciences -- a clinical-stage company developing therapies to treat oncology, autoimmune, and inflammatory diseases -- plunged as much as 37% after updating the status of its lead drug, quizartinib, following a meeting with the Food and Drug Administration.

So what: According to the press release, Ambit had hoped to file a new drug application for quizartinib, a treatment for relapsed/refractory acute myeloid leukemia, utilizing phase 2 and 2b data. The FDA, however, would not support this accelerated approval pathway, noting that it does not agree that, "complete remission with incomplete hematological recovery represents a surrogate endpoint reasonably likely to predict clinical benefit." In other words, Ambit will need to run a phase 3 study for quizartinib before it can file for a new drug application.

Now what: This really isn't as horrible as investors are making it out to be today, however it does mean that Ambit will need to run a costly phase 3 trial when there was a 50-50 shot it would be able to avoid this extra step prior to its FDA meeting. On the bright side, Ambit has $78.9 million in cash, which is more than enough to make it through the end of next year even with this added clinical study. I certainly would like to wait for this phase 3 data before suggesting where Ambit could head next, but if my arm were twisted I'd call today's downward action a bit overdone.

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The article Why Ambit Biosciences Corp. Shares Were Crushed originally appeared on Fool.com.

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