Forte Bio in Free Fall After Its Only Drug Fails Trials

(Bloomberg) -- Forte Biosciences Inc. plummeted after its only product in development failed to have an effect on a common skin disease. 

The stock lost more than $320 million in market value Friday as it tumbled as much as 82% to an all-time low. The plunge came as the company shelved development of its experimental treatment for atopic dermatitis after a study showed it failed to work better than a placebo. 

Last week, Wall Street was universally bullish on the biotech with all analysts tracked by Bloomberg recommending investors buy the stock and predicting shares would more than double over the next 12 months with an average price target above $80 a share. Now it has no buy ratings, three holds and one sell.

“Nothing for us to be proud of here as we were optimistic of a positive result,” wrote Chardan analyst Keay Nakae, who cut Forte’s rating two notches to sell and slashed the 12-month price target to $4 from $105. 

In the risky world of biotech stock investments, companies sometimes face binary results that can lead to massive gains if successful, but given the low rate of success, stocks are also often thrashed by trial failures like Forte’s.

This is certainly not the first time analysts have recommended investors go all in on a stock with a single asset in clinical development before shares tanked. 

In March, all the analysts covering Frequency Therapeutics Inc. recommended buying the stock ahead of some early results that showed its injections for hearing loss worked no better than a placebo. Another trial in age-related hearing loss also failed in May. Frequency hit a record low just last month but four analysts still deem it a buy ahead of more trial results. 

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