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Why Shares of Adagio Therapeutics Soared 25.9% on Thursday

What happened

Shares of Adagio Therapeutics (NASDAQ: ADGI) jumped 25.9% on Thursday. The stock closed at $5.55 a share on Wednesday, opened at $5.62 on Thursday, and hit a midday high of $6.99 before closing at $6.44.

The stock has been quite volatile, with a 52-week range between $4.92 and $78.82. More recently, the company's shares opened at $6.76 on Jan. 13, only to fall to $5.26 by the end of the day.

Image source: Getty Images.

So what

The clinical-stage biotech company recently released phase 2/3 clinical trial findings to show that its lead monoclonal antibody (mAb) therapy, ADG20, was effective in neutralizing the omicron coronavirus variant. The company said it was in talks with the Food and Drug Administration (FDA) to update its clinical trials to allow for an increased dosage of ADG20. The therapy, given by injection, though not a vaccine, is in two separate phase 2/3 trials against COVID-19 and the company said the data from preclinical studies showed that ADG20 activated antibodies against the alpha, beta, delta and gamma variants of COVID-19 as well as showing neutralization activity against other COVID-19 variants.

The company has said it sees four different potential segments where ADG20 can be useful regarding COVID-19: as a treatment for patients with COVID-19, as a preventative for unvaccinated patients who have been exposed to another COVID-infected patient, as a supplement to vaccine protection, and as a general preventative against COVID-19.

However, all of that was reported a week ago. Why the sudden uptick again on Thursday? That's a good question, as the company didn't release any news and there were no new securities filings regarding Adagio.

The company is a small cap ($617.45 million), so it doesn't take much for it to /" target="_blank" rel="nofollow" rel="nofollow">" target="_blank">jump in one direction or another. There's a possibility that more recent news regarding its trial has leaked out, at least unofficially. If ADG20 is truly effective, it could be a game changer for Adagio. For example, Pfizer has said it expects to see $12.94 billion in additional revenue from its COVID antiviral, Paxlovid, and expects to manufacture 120 million doses of the therapy by the end of 2022.

Now what

Adagio has been in a free fall since its high after its initial public offering last year. If the news regarding ADG20's effectiveness is correct, that's one reason for investors to climb on board the biotech stock. However, the antiviral is still in trials, hasn't been approved by the FDA, and by the time it is, omicron may not even be that much of a factor, or other treatments against the variant could have a bigger edge.

Simply stated, there's plenty of risk in the short term for Adagio investors. The company doesn't have any revenue yet and lost $60.4 million in the third quarter. It has enough cash, $663.3 million, to support the company, it said, through 2023.

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Jim Halley owns Pfizer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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