Why Seattle Genetics, Inc. Got Clobbered Today

By Brian Orelli Markets Fool.com

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What happened

Seattle Genetics (NASDAQ: SGEN) is down 15% at 11:57 a.m. EST after announcing the Food and Drug Administration has put a clinical hold on multiple early stage clinical trials testing its cancer drug vadastuximab talirine, which used to go by its code name SGN-CD33A, in acute myeloid leukemia (AML).

So what

The FDA took the action after Seattle Genetics disclosed six patients taking vadastuximab talirine had signs of liver toxicity including several cases of veno-occlusive disease, where blood flow is blocked in the liver. Four of the patients died.

Veno-occlusive disease most often occurs in patients undergoing blood cell transplantation, one of the treatments for AML, so it isn't clear if vadastuximab talirine is causing the problem. More than 300 patients have been treated with vadastuximab talirine to date, so it's a fairly rare problem.

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The FDA placed a full hold -- meaning no more treatments until it's lifted -- on a phase 1/2 trial testing vadastuximab talirine in pre- and post-allogeneic transplant AML patients. Two other phase 1 trials for vadastuximab talirine are only on a partial hold, so no new patients can be enrolled but existing patients can continue treatment if they want to.

Interestingly, the FDA didn't place other clinical trials testing vadastuximab talirine on clinical hold, including the phase 3 CASCADE trial in older AML patients and a phase 1/2 trial in another blood cancer called myelodysplastic syndrome.

Now what

Seattle Genetics said it's working with the FDA to identify whether vadastuximab talirine is the cause of the liver toxicity and hopes to "identify appropriate protocol amendments for patient safety and to enable continuation of these trials."

The fact that the FDA didn't put all the clinical trials on hold is a good sign that the agency thinks, even if vadastuximab talirine is contributing to the liver toxicity, it's only likely to be a problem in a subset of AML patients. As a cancer treatment, side effects are more likely to be tolerated by the FDA compared to treatments for less-fatal diseases.

Investors should also keep in mind that vadastuximab talirine isn't Seattle Genetics most important drug. While adding a second drug would be helpful to its revenue growth, sales of already-approved Adcetris and expanding the drug's market through ongoing clinical trials contribute more to Seattle Genetics valuation than vadastuximab talirine currently does.

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Brian Orelli has no position in any stocks mentioned. The Motley Fool recommends Seattle Genetics. 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 Motley Fool has a disclosure policy.