Why Shares of Arrowhead Research Corp Imploded Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Arrowhead Research , asmall development-stage biotech company,have lost a quarter of their value today after the U.S. FDA requested restrictions on its clinical tests of hepatitis B treatment ARC-520.

So what: Arrowhead is still cleared to begin Phase 2b tests on ARC-520, but the FDA has placed a partial clinical hold on the study requesting that Arrowhead begin testing at a dosage of 1 milligram per kilogram of patient body weight, rather than the 2 and 4 mg-per-kg doses the company had planned to test. The FDA also requested additional information from Arrowhead's Phase 2a tests, in which the company has been testing doses in the 1 to 4 mg-per-kg range. Arrowhead has not reported any serious adverse events or evidence of organ toxicity from this test, which is ongoing, and the company plans to continue preparing for its Phase 2b study as well as for other studies planned in Europe and Asia.

Now what: This isn't good news, but it's also not a rejection, and Arrowhead could still gain approval to proceed with the study as originally planned. However, shares are back to being down 50% over the past six months after this crash compounded with an earlier megacrash over bad results from ARC-520. The market has clearly decided that Arrowhead's prospects have dimmed, but savvy biotech investors might disagree. Unfortunately, there's not enough evidence to support Arrowhead's chances of meeting its goals with ARC-520, which means that it's probably smarter to stay on the sidelines for the time being.

The article Why Shares of Arrowhead Research Corp Imploded Today originally appeared on Fool.com.

Alex Planes has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.