Why Takeda Pharmaceutical Stock is down more than 10% today

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What happened

Shares of a Japanese pharmaceutical company Pharmaceutical Takeda (NYSE: TAK) fell more than 10% as Wednesday’s closing bell approached, following the company’s decision to prematurely end a key drug trial due to safety concerns.

So what

The drug in question is TAK-994, in phase 2 trials for the treatment of two different types of narcolepsy. Takeda did not provide details on the dangers of the therapy, limiting its explanation to “a safety signal has emerged in phase 2 studies of TAK-994”. But it is clear that this is worrying enough to bring about an abrupt end to the trial.

Image source: Getty Images.

The company is still evaluating the risks and net benefits of the drug, which was called a breakthrough therapy by the Food and Drug Administration in July. Despite the need implied by the FDA designation, however, the sudden decision to discontinue enrollment of patients in the program does not bode well for TAK-994.

Now what

This is a serious disappointment, but not necessarily surprising. Takeda Pharmaceutical has been losing ground since 2018, with Wednesday’s setback accounting for only part of the 16% sell-off of the stock since mid-September, 25% drop from March high and halving since the summit in early 2018.

Yet TAK-994 was also a victory that Takeda Pharmaceutical needed. Market research firm GlobalData estimated at one point that the drug would reach annual sales of over $ 650 million by 2027 due to the underlying need and limited competition. Now this call is completely questioned.

Still, after a long streak of poor performance that paved the way for today’s move to multi-month lows, this could be a buying opportunity for speculators who can bear the risk. Takeda had $ 28 billion in revenue in the prior year, turning approximately $ 9 billion into operating profit. The figures reflect the sales and profits of the previous year. The company’s primary target for 2030 is $ 47 billion, which may still happen with or without TAK-994 approval in the interim.

Traders have certainly taken riskier bets.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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