Today’s price action has been otherwise bullish in the stock market. However, for shareholders in NRx Pharmaceuticals (NASDAQ:NRXP), it’s been a rough day. At the time of writing, NRXP stock is down approximately 60% on news that its Data Safety Monitoring Board (DSMB) has recommended the company halt its trial of ACTIV-3b, a drug aimed at critical Covid-19 patients, due to futility.
The suspension of a trial is big news and likely to induce a strong response from the market. Accordingly, today’s price action with NRXP stock may not necessarily be surprising to many investors.
That said, let’s dive into what this announcement means for investors considering NRx Pharmaceuticals.
Is NRXP Stock Futile Following This Announcement?
Futility seems like an ominous word, and in this case, it certainly is. In the pharmaceutical business, the term “futility” is generally applied to trials that are not expected to reach their endpoint or objectives. In other words, if interim results suggest there will not be statistical significance with a given study, resources are pulled to be put toward research with a higher probability of success.
Such an approach certainly makes sense. Research dollars should be stretched as far as they go and allocated appropriately to the most promising projects.
However, the issue is the implication that NRx’s research wasn’t promising. With this funding pulled, investors have reason to question the company’s overall drug pipeline. In this context, this announcement looks like a big negative on a forward-looking basis.
NRx did note that there were no safety concerns for this study. That said, it appears the initial data provided were not indicative of a trial that would have ultimately proven successful. It’s currently unclear what this means for the rest of the company’s offerings. However, investors should take extreme caution with right now on this news.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.