Ebb & Flow

Dov (DOVP) fell $2.98 (17%) to $14.99 on 5.2 million shares on Friday after suspending dosing in a Phase III trial of ocinaplon to treat generalized anxiety disorder. The suspension followed enzyme elevations in liver function tests (see B9).

All in all, a 17% drop isn't drastic following a Phase III hiccup. The compound isn't dead - DOVP plans to unblind the study and evaluate safety data before deciding whether to proceed or revert to a preclinical backup program. And DOVP has another Phase III compound - bicifadine - to treat pain.

Moreover, DOVP is entitled to a 3.5% royalty on sales of indiplon, which DOVP in-licensed from Wyeth (WYE) in 1998 and out-licenased to Neurocrine (NBIX) later that year. The insomnia therapeutic is under FDA review.

At Friday's close, DOVP was valued at $345.4 million. Backing out the company's $125.9 million in cash as of June 30 leaves a technology value of $228.5 million.

It's possible the news didn't take investors by complete surprise. In DOVP's first Phase II trial of ocinaplon, one patient had jaundice that was associated with elevated liver enzymes. The patient required hospitalization, but has fully recovered, according to the company.

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