Updated from 9:26 a.m. with Monday's stock price.
CAMBRIDGE, Mass. (TheStreet) -- Shares of Agios Pharmaceuticals (AGIO) sank Friday -- and 9% more on Monday as of midday -- because investors believed updated clinical trial results showed Agios' experimental leukemia drugs were less effective than previously thought. But that's not exactly true. Agios' drugs performed nearly as well as before. The change was in the method used by Agios to analyze the trial results.
I'm calling Agios' free-fall -- the stock closed down 10% Friday but was off as much as 16% intraday, with further to fall on Monday -- Denominator-gate. Here's what happened.
Let's focus on the phase I study of Agios drug AG-221, because it's larger than the phase I study of AG-120. On Friday, Agios reported that 40% of patients with advanced blood cancers (mostly relapsed/refractory acute myeloid leukemia) responded to treatment with AG-221.
A 40% response rate for a drug treating patients with cancer no longer responding to multiple prior therapies is damn good.Must Read: The Biotech Bubble Debate: Solid Science vs. Sky-High Valuations
Except last December, Agios reported a 56% response rate to AG-221 from the same study.
A 56% response rate falling to 40% doesn't make investors happy, so down went Agios.
But what most investors didn't notice was that Agios changed the method by which it calculated the response rate this time around, compared to last December. By taking a traditional, "intent-to-treat" approach to calculating response rate on Friday, Agios included more patients in the denominator than it had last December when it used a "per protocol" analysis to calculate response rate.