Acer Therapeutics (ACER) Stock Tumbles On FDA Rejection

Acer Therapeutics ACER Stock News

Acer Therapeutics Inc (NASDAQ: ACER) is tumbling in the market, giving up more than 77% of its value early on in the trading session. The fall comes after the company announced that it received a Complete Response Letter (CRL) from the United States Food and Drug Administration (FDA). Here’s what’s happening:

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ACER Stock Falls Hard On CRL News

In a press release issued in the pre-market hours this morning, Acer Therapeutics dropped a bomb on investors. Unofrutnately, the company received a CRL from the FDA regarding its New Drug Application for EDSIVO.

EDSIVO is a treatment under development as a potential option for patients with vascular Ehlers-Danlos syndrome, also known as vEDS. In the press release, ACER said that the FDA requires an adequate and well-controled trial to determine whether or not the treatment is effective. In particular, the new trial is required to determine if the treatment actually reduces the risk of clinical events in patients with vEDS.

As is just about always the case when a CRL is received, the company said that it plans on requesting a meeting with the FDA to discuss the response to its Application. In a statement, Chris Schelling, CEO and Founder at ACER, had the following to offer:

We remain committed to working closely with the FDA to fully understand its response. We expect to respond to the FDA in the third quarter of this year.

Why This News Is So Painful

Let’s face it Acer Therapeutics isn’t a one trick pony. In fact, the company has a pretty strong pipeline with several promising candidates. So, why is it that a request for another clinical trial in one of the candidates is leading to such declines?

Well, investors never like to see a CRL to begin with. These rejection letters ultimately mean one of two things. Either the company, in this case ACER, will have to spend more time and money to push a new drug to approval, or it is unlikely that the FDA will approve the treatment.

In the case of Acer Therapeutics, the latter is probably the case. The truth is that ACER has performed multiple clinical trials. If the company didn’t perceive efficacy in these trials, it would not have submitted the FDA. In future clinical trials, results are likely to be the same, suggesting that chances of approval are minimal.

However, the reason for the declines goes quite a bit further than the rejection of this ONE drug. At the end of the day, the rejection calls the company’s clinical process and data into question. Why would the FDA reject a positive treatment option? If the data suggested that the treatment was ineffective, why would ACER submit the New Drug Application? Are we likely to see similar responses from the FDA surrounding other assets in the company’s pipeline?

These are all questions that investors are asking right now. At the end of the day, it’s this high level of uncertainty that’s leading to the tremendous declines.

Is There A Light At The End Of The Tunnel?

While ACER did receive a rejection from the FDA, there may be a light at the end of the tunnel here. Should the meeting go well and a new trial take place, there is a slim chance that efficacy will be demonstrated in a way that the FDA wants to see.

However, I believe that the larger opportunity is in the company’s other assets. Should EDSIVO not make it to approval, the company does have a strong pipeline to fall back on that could lead to approvals in the future. Would I make an investment right now based on that? NO! But, there could be long run value if the Acer Therapeutics plays its cards right.

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What Do You Think?

Where do you think ACER stock is headed moving forward? Join the discussion in the comments below!

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