Downside Alert: Here's Exactly Why OncoGenex Pharma Is Having An Awful Start To December

Shares of OncoGenex Pharma plunged more than 30 percent Wednesday morning, following an announcement that its Phase 3 AFFINITY trial with custirsen will continue based on the pre-planned interim futility analysis of the intent-to-treat population.

Final results of the study are expected in the bottom half of 2016, but are dependent on the timing of the event-driven final analysis.

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"The overall survival endpoint of the entire AFFINITY trial remains clinically meaningful and its target hazard ratio of 0.75 is attainable with sufficient power to demonstrate a benefit from custirsen for men who are battling advanced prostate cancer," said Scott Cormack, president and CEO of OncoGenex in a press release. "We designed the AFFINITY trial so that the final analysis of the ITT population could stand alone as a Phase 3 submission to regulatory agencies regardless of the outcome of the smaller subgroup."

Stifel: Move To The Sidelines

Stephen Willey of Stifel downgraded shares of OncoGenex to Hold from Buy, while removing a prior $7 price target.

"We believe the OS analysis in the prospectively-defined subgroup of poor-prognostic/chemotherapy-experienced CRPC patients enrolled in the P3 AFFINITY trial (cabazitaxel ± custirsen) represented the best opportunity for custirsen to secure a P3 clinical win," Willey wrote.

"And while acknowledging the rigorous statistical threshold doesn't rule out the potential for a subsequent win on an intent-to-treat (ITT) basis, we believe prior P3 SYNERGY data (docetaxel ± custirsen, chemotherapy-naïve CRPC) suggests visibility here is minimal."

Willey continued that AFFINITY "fails to achieve statistical threshold for overall survival (OS) in
subpopulation of metastatic castrate-resistant prostate cancer (CRPC) patients with poor-prognostic risk factors."

In addition, the analyst stated, "We believe prior P3 SYNERGY ITT data and the biological rationale supporting clusterin inhibition as a means of overcoming treatment resistance suggests these poor-prognostic AFFINITY patients were the most-appropriate subjects in which to demonstrate a custirsen-mediated treatment benefit."

Willey also added, "We believe visibility into 1Q16 PFS data from the P2 SPRUCE trial (carboplatin/pemetrexed ± apatorsen, first-line NSCLC) is similarly-limited and apatorsen's safety/tolerability profile still remains a source of longer-term concern for us."

Bottom line, the analyst stated that it is "difficult" to have any "high degree of confidence" moving forward. As such, investors should move to the sidelines – even if the stock's valuation implies it is trading at or below its cash on hand.

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