The Innate Immunotherapeutics Ltd (ASX: IIL) share price will likely dive this morning after the group released negative results to its Phase 2b trial for multiple sclerosis.
In a randomised, double-blind, controlled trial (< jargon that means ‘a very high quality trial’) initial analysis of the trial data ‘show no clinically meaningful or statistically significant outcomes in measures of neuromuscular function or patient-reported outcomes’.
Although further analysis is ongoing, ‘it is unlikely the result will significantly change’.
I take my hat off to the company for its forthrightness in the announcement, however it is going to place shareholders in a very tough position. The way the trial was conducted and measured, it appears it would be very difficult to argue that the trial methodology was flawed.
Simply put, it looks as though the treatment MIS416 is not effective, which is a disaster for a company which only has one primary treatment in development. Innate has a market capitalisation of $144 million, a treatment that doesn’t work, and $6 million in cash as of 31 March 2017.
One user of the Twittersphere suggested this morning that the company is going straight to zero and that seems to be a fair assessment.
Management has stated that “the Company will be sponsoring an analysis of the trial results at the patient level to see if there is a group of clinical responders which might not be evident from the top line population-based analysis.”
A scientifically valid approach, for the layperson this is basically selecting the people that did benefit (or appeared to benefit) to identify why they benefited and others did not.
It implies either a) a lot more investigation to identify specific biomarkers or what have you, or b) an insidious type of bias where one cherry picks the data until they get the conclusion that they want.
Neither outcome is immediately commercialisable, with the end result being that Innate Immunotherapeutics looks extremely overvalued and set to tumble when it resumes trade.
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Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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