This morning Argos Therapeutics (ARGS) announced that its IDMC (Independent Data Monitoring Committee) recommended the discontinuance of its phase-3 trial for its renal cell carcinoma treatment. The stock is down substantially in early morning trading as a result.

This news directly contradicts the signals given off by Argos recently. In December the company hosted an “Investor Day” in New York City, at which time it shared data indicating its cancer treatment was performing as expected. In January the company announced it would be breaking ground on a new manufacturing facility, presumably in anticipation of receiving FDA approval to begin commercial distribution of this treatment upon successful completion of the trial.

Our thesis for owning ARGS was based on the belief that this trial would be completed successfully, and the company would receive FDA approval for commercial use. In turn, we felt that would induce a major drug manufacture to acquire Argos to own its patents and other intellectual property associated with this form of cancer treatment.

It is possible that today’s development may induce Argos to seek an acquirer since it will be difficult, if not impossible, for the company to raise capital in the debt or equity markets. But if that does not occur, it is equally difficult to imagine a scenario that allows Argos to remain both independent and solvent beyond this year based on its current cash flow requirements.

For that reason we are changing ARGS to a ‘hold’, and will be monitoring the situation closely to see if such a transaction appears likely.