Biotechnology stocks and sector-related exchange traded funds rallied late Wednesday but could not maintain their momentum after a high profile drug trial failure.
Alkermes (NasdaqGS: ALKS), a central nervous-system drug developer, revealed two late-stage Phase 3 studies of its treatment for depressive disorder did not meet primary endpoints, Reuters reports.
KMI shares plunged 42.3% Thursday, erasing over a third of its market value.
“We believe trial failures present a major setback in the evolution of the company,” Guggenheim Partners analyst William Tanner wrote in a note.
The negative results weighed on the biotech sector. On Thursday, the iShares Nasdaq Biotechnology ETF (NasdaqGM: IBB) dropped 2.2%, First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT) declined 2.6% and the Market Vectors Biotech ETF (NYSEArca: BBH) fell 2.5%. Meanwhile, the broader health care sector was lower, with the Health Care Select Sector SPDR (NYSEArca: XLV) down 0.5% – XLV includes a 23.8% tilt toward biotech and 38.9% in pharmaceuticals.
It has been several months since a high profile phase 3 trial failed, which has significantly depressed the outlook for the broader biotech sector Thursday after the Nasdaq Biotechnology Index ended almost 3% higher Wednesday.