Chiasma Inc (NASDAQ:CHMA) Slain By A Late-Night Negative FDA Response

[[tagnumber 0]][[tagnumber 1]]Last Friday, the U.S. Food And Drug Administration (the FDA) refused to give approval to Chiasma Inc‘s (NASDAQ:CHMA) recently filed new drug application for Mycapssa (octreotide) capsules for the maintenance treatment of adult patients with acromegaly. Citing lack of evidence of efficacy, the FDA‘s Complete Response Letter (CRL) urged the late–stage biotech to carry out yet another trial in an attempt to prove that its product candidate is efficient enough. Do we have to guess what‘s happened within the last few hours of trade?[[tagnumber 2]] [[tagnumber 0]]Not only has CHMA joined the ranks of the all–time single–day losers on the Nasdaq with more than 60% of its value having already been chopped off for a long time to come. Understandably enough, investors are seething with rage, which explains the army of shareholder rights law firms which have already commenced investigations of the company‘s July IPO in the light of the current FDA fiasco. Back then, a total of 6.3 million shares of common CHMA stock found their way into the hands of outside investors for the first time ever. While some of them might have since shorted their stakes completely, others must have expected quite a different outcome with the FDA.[[tagnumber 2]] [[tagnumber 0]][[tagnumber 6]]And an eleventh–hour negative change of course will certainly have its implications for months (if not years) to come. Why do we think so? Because that is how long it will likely take Chiasma‘s management to redeem themselves should the next clinical trial meet with success. In the meantime, they will also have to cope with proving that the IPO prospectus neither contained untrue statements of material facts, nor omitted important facts that might otherwise have added a tinge of overpositivism regarding the biotech‘s real business and financial prospects.[[tagnumber 7]][[tagnumber 7]]Last week, CHMA shares were traded in the double digits. Today, this is history. CHMA has just closed today‘s session at $3.75 per share, down a whopping 63% from its previous close, thus wiping away $150 million worth of stock within one single day.[[tagnumber 2]]