Why Provention Bio Stock collapsed today

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What happened

Actions of Organic Provention (NASDAQ: PRVB) collapsed 28.8% at market close on Friday. The huge drop came after a U.S. Food and Drug Administration (FDA) advisory committee voted 10-7 in favor of the recommendation to approve teplizumab to delay type 1 diabetes.

So what

Investors were clearly expecting a more lopsided vote for teplizumab after FDA backgrounders looked fairly positive on Provention’s clinical data. These documents indicated that the company’s TN-10 clinical study “successfully demonstrated the therapeutic effect of teplizumab in delaying the diagnosis of T1D.”

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However, the FDA’s Endocrinology and Metabolic Drugs Advisory Committee was not as convinced of the investigational drug. Some committee members expressed reservations about the small size of the pivotal study conducted by Provention. They were also concerned that patients would not be followed up after being diagnosed with type 1 diabetes.

It is possible that the relatively narrow vote may increase the chances that teplizumab will not be approved by the FDA. However, the agency generally accepts the recommendations of the advisory committee.

Now what

What’s next for the biotechnology stock? The FDA is expected to announce its decision on approving teplizumab by July 2.

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Keith Speights has no position in any of the listed securities. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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