Why Sesen Bio Stock Bounced Back Sharply Today

One day has made a huge difference for the stock of Sesen Bio (NASDAQ:SESN). On Tuesday, the shares blasted almost 24% higher (albeit from a low base of $1.22 per share), a day after cratering by 42%. What in the world is going on with this volatile stock?

So what

Monday’s steep dive was due to the Food and Drug Administration, which told Sesen Bio that it would not be approving the company’s Biologics License Application (BLA) for bladder cancer drug Vicineum. The stock sell-off made perfect sense, considering that Vicineum is part of every Sesen Bio pipeline program, either alone or as part of combination therapy.

Medical professionals conferring in a hospital lobby.g.foolcdn.com/image/?url=https%3A//g.foolcdn.com/editorial/images/639698/hospital-lobby.jpg&w=1000&op=resize 1000w, g.foolcdn.com/image/?url=https%3A//g.foolcdn.com/editorial/images/639698/hospital-lobby.jpg&w=2000&op=resize 2000w”/>

Image source: Getty Images.

Investors have a tendency to overreact to strongly positive or negative news, and today’s recovery appears to be a bounce back from Monday’s fire sale.

A big reason could be that the FDA’s notice isn’t necessarily the end of Vicineum; according to Sesen Bio, the regulator provided recommendations for additional information that might ultimately win approval for the drug. Obviously encouraged by this, the company said it plans to request a meeting to earn Vicineum a fresh chance.

Now what

So ultimately this feels like a “not much to lose here” situation. Given the extremely low share price, investors might be calculating that any potential upside with Sesen Bio outweighs the modest losses they might suffer if a revised Vicineum BLA from the biotech fails. After all, the drug certainly has potential (as it targets a very challenging type of cancer), and the company holds the rights to it in most parts of the world.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a Motley Fool premium advisory service. Were motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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