Here's Why Celldex Therapeutics' Stock Got Crushed Today

What's happening: Celldex Therapeutics , a clinical-stage oncology company, saw its shares drop by 25% on exceptional volume this morning on the back of its second-quarter earnings release. As a developmental-stage biotech with a cash runway that reportedly extends through 2017, investors probably weren't worried so much about the company's financials, but rather the regulatory update for Rintega, an experimentalvaccine designed to elicit a powerful immune response against EGFRvIII-positive brain tumors.

Unfortunately, management stated in the accompanying conference call that they now believe the U.S. Food and Drug Administration is unwilling to review the vaccine on an accelerated basis, based on its impressive midstage study dubbed "ReAct", citing the study's small sample size as a major area of concern. So, instead, the FDA apparently prefers to wait until Rintega's late-stage trial, ACT IV, wraps up in late 2016 before agreeing to a formal regulatory review. That said, the discussions on Rintega's regulatory pathway are still preliminary at this point, and nothing is set in stone as of yet.

Why it's happening: At the 2015 American Society of Clinical Oncology meeting earlier this year, Celldex updated investors on Rintega's midstage trial, where the vaccine reportedly led to a minor clinical benefit in terms of progression-free survival but essentially doubled overall survival (30% vs. 15%) at the six-month mark when used in conjunction with Avastin, per the intent-to-treat analysis, compared to patients on Avastin alone. Patients taking the combo of Avastin plus Rintega were also able to reduce the amount of steroids they were taking, according to the company.

Because this form of brain cancer is particularly aggressive, always fatal, and there are no decent treatment options available to patients at the moment, the market was apparently overly optimistic about the prospects of an accelerated approval.

Given that Rintega has already shown demonstrably more clinical benefit in this patient population than the current standard of care, albeit in small studies, the vaccine looks, to me, like it has a better than average shot at becoming an important new treatment option for this deadly disease. As such, I think investors with a high tolerance for risk and volatility may want to consider picking up some shares in this promising biopharma after this hefty pullback.

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George Budwell has no position in any stocks mentioned. The Motley Fool recommends Celldex Therapeutics. 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.

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