Aquestive Therapeutics, Inc. (NASDAQ:AQST) is one of the stocks Jim Cramer recently looked at. During the episode, Cramer highlighted the stock’s massive decline, as he remarked:
… Last Friday, Aquestive got slapped down by the FDA, and the stock plunged 37% in a single session before losing another 15% this week… Despite the ambiguous slap down from the FDA, Aquestive maintains that all of its engagement with the FDA has been ‘highly collaborative.’ And the management said that since they received the letter, the FDA has repeatedly said the review of Anaphylm remains ongoing. These guys still sound really confident about their drug and their ability to get it approved both here and overseas.
At this point, I’m not sure if they deserve the benefit of the doubt, but it’s worth keeping in mind. Now, on top of that, Aquestive did this secondary offering in August, selling 21.25 million shares at $4 to raise $85 million. Now, that’s one of the reasons why I was willing to recommend the stock for speculation in September. These early-stage biotechs often have to raise money by selling stock, something that can hammer the share price. So I liked that the big secondary offering had already happened…
Ultimately, if you got stuck with this big loss in Aquestive, I wouldn’t be looking to sell it down here after the big move lower because there’s still some hope remaining that Anaphylm could be approved by the FDA, not to mention possible approvals overseas… I mean, I have far less confidence than I had before. So if you don’t already own it, there’s no reason to stick your neck out and buy some. What bothers me the most about this whole situation is the ambiguous nature of it. When the FDA tells you that they can’t go ahead with the approval process until you fix your new drug application, but then they don’t tell you what’s wrong with the new drug application, doesn’t that feel fishy to you?…
Besides, at this point, it’s been a week since they got the letter. Does management still not know what the problem is? If they don’t, that worries me. Now, more broadly speaking, this is also a really important lesson about the dangers of speculation, a painful lesson. Bottom line: You need to understand the risk when you’re buying a speculative stock. And if you decide that you’re not okay in a situation that can end up like Aquestive, I gotta steer towards many of the large-cap pharma companies that I spoke with earlier this week at the JPMorgan Healthcare conference. Those stocks offer less potential upside, at least in the near term, but they’re not going to get cut in half over the course of a week thanks to a single decision from the FDA.
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Aquestive Therapeutics, Inc. (NASDAQ:AQST) develops therapies for neurological, psychiatric, and allergy-related conditions.
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Disclosure: None. This article is originally published at Insider Monkey.
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