Renovo shares plunge even after 'buy' signals

Investors have always had a habit of overreacting to biotech news, but yesterday's mauling of the UK's Renovo may indicate that shareholders are moving to DEFCON 1 panic mode. As we reported, researchers for the company reported mixed data from two trials of its scar reduction therapy. The data were from a series of trials being mounted to demonstrate how patients respond to the drug, and one trial failure could have been explained by dosing levels. An earlier failure was blamed on a bad trial design. And there have been seven trial successes.

Excuses, excuses. That's clearly not what investors--who were calculating that the drug had a chance of becoming a $12 billion mega-blockbuster--were willing to tolerate. Shares plunged even as analysts were issuing "buy" signals.

"Biotech rides on a rollercoaster of perception. When people look at a potential $4 billion market as with Renovo they can get overexcited and the stock surges. It can take just one piece of negative data for it to plunge again. There is no neat metric to tie share prices down to," Ibraheem Mahmood, biotech analyst at Investec, told The Times.

- read the article from The Times

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