Why Is Satsuma Pharmaceuticals (STSA) Stock Down 80% Today?

  • Satsuma Pharmaceuticals (STSA) just announced that its migraine drug failed in a late-stage study.
  • The company seems to have effectively given up on the drug now.
  • STSA stock is collapsing on heavy trading volume today.
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The focus in the world of drugmakers is on Satsuma Pharmaceuticals (NASDAQ:STSA) right now, but not in a good way. Specifically, the company’s proposed treatment for migraine headaches didn’t meet its “primary endpoints,” as they say. Now, STSA stock is dropping like a rock because Satsuma is basically done with the migraine drug, at least in its current form.

Based in San Francisco, Satsuma Pharmaceuticals is a tiny biotechnology business that doesn’t typically get a lot of attention on Wall Street. STSA stock is in the news today, though — and financial traders are definitely paying attention.

Here’s the scoop: Satsuma Pharmaceuticals has (or had) a lead product candidate, a migraine drug called STS101. You know how it goes sometimes with small biotechs with a primary product. If that product doesn’t achieve its clinical objectives, it can be make-or-break for the business.

Such was the case, it seems, with Satsuma and STS101. Reportedly, the drug missed the mark on multiple counts in a Phase 3 clinical trial. As a proposed migraine treatment, STS101 wasn’t “statistically superior to placebo at two hours post-administration on the co-primary endpoints of freedom from pain and most bothersome symptom.”

What’s Happening With STSA Stock?

The response among investors has been swift, immediate and harsh. Today, STSA stock is plunging more than 80% on heavy trading volume — volume that’s several multiples higher than usual.

There’s more to this story, however. As it turns out, Satsuma seems to be prepared to throw in the towel on advancing the current iteration of STS101.

Sometimes, drug developers will persist with a specific drug formulation even after a clinical disappointment. In contrast, Satsuma is evidently going back to the drawing board. The company starkly announced that it “does not plan to invest in commercializing STS101.”

Instead, Satsuma Pharmaceuticals “will actively explore alternatives to maximize value for shareholders, while minimizing cash expenditures.” How the company plans to achieve this isn’t specified in the press release.

Perhaps more detail on Satsuma’s replacement plans for STS101 could stem the bleeding in STSA stock today. Until there’s more clarity on this topic, though, there may be more headaches in store for investors.

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On the date of publication, David Moadel did not hold (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.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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