Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

A Little Bad News Goes A Long Way

|Includes: Cascadian Therapeutics, Inc (CASC), PFE

Oncothyreon (ONTY) released information showing that its experimental drug Stimuvax (L-BLP25) did not achieve a notable improvement in patients with non-small cell lung cancer. The drug is (was?) in Phase III trials, the most crucial phase in drug development. In plain terms, it means Stimuvax is at best no better than current treatments.

Pretty much the kiss of death for that drug.

ONTY's stock price is down >$2.50 in early trading. Ouch.

Bad-news drops are a common event. When I first bought Pfizer (NYSE:PFE), it was on the day that Pfizer voluntarily pulled infant formula sold to China that had been mislabeled. Shortly after I bought it, stocks were down by more than $1.00/share. To me, it was clear that there was nothing fundamentally wrong with PFE - just a bad-news drop. I doubled my holdings. Of course, PFE is a major drug company with a wealthy pipeline of drugs in development.

ONTY is no PFE, but it does have more in its pipeline. Its PX-866 drug is moving from phase I to phase II testing, and shows promise; a second drug, ONT-701, is in pre-trial preparation; it also has ONT-10, a vaccine, that is in phase I trials. This strikes me as a promising pipeline for a small bio-firm.

It will likely take a while for ONTY to redeem itself, but I shall remain long ONTY until it seems that there is nothing the company can do to recover.

Time to suck it up and deal with it.

Disclosure: I am long ONTY, PFE.

Additional disclosure: This is not an endorsement for either Oncothyreon or Pfizer. Please use your own judgment about purchasing a stock after doing research and using due diligence.