A key study from Avidity Biosciences remains on hold after a patient using its test-phase treatment experienced a "rarer than rare" side effect, leading RNA stock to plummet Thursday.
Avidity is testing its experimental drug in patients with myotonic dystrophy 1, an inherited disorder that causes progressive muscle weakness. In September, the Food and Drug Administration placed Avidity's study on partial hold, meaning the company couldn't enroll any new patients.
On Thursday, Avidity said the study remains on hold as the FDA looks into the extremely rare side effect that occurred with one patient. That patient experienced limited blood supply in the brain followed by a hemorrhage. Avidity says several independent experts couldn't find a biological link between the event and the drug.
"It's hard to say whether the rarer than rare expected incidence of the serious adverse event will make investors feel better or worse — arguments can be made either way," SVB Securities analyst Joseph Schwartz said in a note to clients.
On today's stock market, RNA stock plunged 16.8% to close at 16.80, paring much steeper losses earlier in the day.
RNA Stock: Blood-Brain Barrier Is Key
Importantly, Schwartz noted, Avidity's drug doesn't pass through the blood-brain barrier. The blood-brain barrier is a network of blood vessels and tissues that keep harmful substances from reaching the brain. This makes it less likely Avidity's drug was the cause of the patient's rare side effect.
Still, RNA stock crashed to its lowest point since December, undercutting its 200-day moving average, according to MarketSmith.com.
The partial hold means Avidity is still dosing patients in the study, called Marina. It's also running an open-label extension study. This means patients know they're receiving the drug. Avidity is submitting data from those studies in the hopes the FDA will lift the hold.
Ultimately, Avidity plans to enroll up to 38 patients in the Marina study. The results of that test are due in April with data from the open-label extension study expected in the fourth quarter.
"The topline Marina readout next month at (the American Academy of Neurology's annual meeting) will be important for further elucidating (the drug's) risk/benefit profile," Schwartz said.
He kept his outperform rating on RNA stock.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
