Shares of Arrowhead Pharmaceuticals Inc sank more than 60 percent in premarket trading on Wednesday, a day after the company said it would stop developing all drugs being tested on humans due to a setback in its drug-delivery technology.
Arrowhead focuses on making drugs using ribonucleic acid interference (RNAi) therapies, which aims to silence certain genes to curb the production of disease-causing proteins, while existing medicines work by binding to these proteins to deactivate them.
But Arrowhead has faced regulatory concerns over its so-called delivery vehicle that help the drugs reach their target.
The trouble began earlier this month when the U.S. Food and Drug Administration placed a hold on a 12-patient mid-stage study testing Arrowhead's hepatitis B treatment, ARC-520, after primates in a separate pre-clinical study died on being given a high dose of the delivery vehicle, EX1.
After discussions with regulators and other experts, it became apparent that there would be substantial delays in all clinical programs that utilize EX1, Arrowhead said on Tuesday.
So the Pasadena, California-based company elected to abandon all EX1-containing programs – ARC-520, ARC-521 and ARC-AAT, which were being developed to treat liver diseases. Arrowhead also said it would cut 30 percent of its workforce.
The company's shares were trading at $1.75 before the bell on Wednesday, set to test their record low of $1.65.
Arrowhead still has a plethora of drugs in the pre-clinical stage that are being developed to be used with different delivery mechanisms.
Amgen Inc has a stake in Arrowhead and has teamed up with the company to develop gene-silencing therapies for heart disease.
However all these programs are at least one to two years away from being ready to be tested on humans, William Blair analysts said, downgrading Arrowhead's stock to "market perform" from "outperform" and slashing its price target to $2 from $12.
But analysts were also quick to note that Arrowhead's move did not raise questions on the potential of RNAi therapies in general.
RNAi has long interested drug developers and its current proponents include Alnylam Pharmaceuticals Inc, Ionis Pharmaceuticals Inc and privately held Quark Pharmaceuticals.
But success has been hard to come by.
Alnylam last month said it would abandon a drug being developed to treat a rare genetic condition that can cause heart failure, after data showed that patients given the drug were more likely to die than those given a placebo.
(Reporting by Natalie Grover in Bengaluru; Editing by Savio D'Souza)