Why Mirati Therapeutics, Inc.'s Shares Are Being Obliterated Today

What: Investors in Mirati Therapeutics are having a rough start to the week. The clinical-stage biotech's stock is down more than 40% as of 11:30 a.m. EDT after management shared a few clinical updates that caused some investors to worry.

So what:Mirati Therapeutics provided updates on three of its ongoing clinical programs, but traders appear to be focused on news related to its phase 1b glesatinib dose expansion study. Glesatinib is being researched as a potential treatment for two very specific types of non-small cell lung cancer.

During the trial, glesatinib was able to produce tumor regression in 10 out of the 11 patients who used the therapy, which was an encouraging result. Unfortunately, nine of those 11 patients experienced bioavailability and tolerability issues from the treatment, resulting in the need to interrupt their therapy and lower their dose.

To help address these tolerabilityissues, Mirati has confirmed that it will be using a new formulation of glesatinib in their phase 2 study. Management believes that this new formulation has a good chance at fixing those exposure and tolerability issues.

However, not everybody is convinced that the new formulation is a slam dunk, and at least one analyst has already tempered his enthusiasm for the company's shares. Leerink Partners analyst Michael Schmidt downgraded Mirati Therapeutics shares today to market perform and lowered his price target from $37 to $20, saying,"Our new PT of $20 (from $37) reflects a lower probability of success for glesatinib, as well as reduced market assumptions to account for potential added competition."

The increased uncertainty about glesatinib's future mixed with the analyst downgrade are weighing heavily on the company's shares today.

Now what: Despite the setback, Mirati Therapeutics CEO Charles Baum offered investors encouraging words about this new formulation by saying:

While it was great to see that glesatinib was able to produce tumor regressionin the majority of patients tested, being forced to change the drug's formulation does add an additional element of risk to an already risky stock. For that reason, investors might want to stay on the sidelines until the company shares additional data on how well its new formulation is performing before they consider this sell-off a buying opportunity.

The article Why Mirati Therapeutics, Inc.'s Shares Are Being Obliterated Today originally appeared on Fool.com.

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