Why Corbus Pharmaceuticals Holdings Inc. Tumbled Today

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What happened

Shares of Corbus Pharmaceuticals Holdings Inc. (NASDAQ: CRBP) were down 18.6% as of 11:50 a.m. EDT on Friday. The big tumble followed yesterday's huge gain, which stemmed from news that the clinical-stage biotech made a deal for exclusive worldwide rights to develop and market drugs based on more than 600 compounds targeting the endocannabinoid system. So why did Corbus fall today?

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The most likely culprit is that some investors decided to take profits after the huge jump on Thursday, creating selling pressure that drove the stock lower. It's also possible that a broader sell-off in marijuana stocks could be pulling Corbus down. Although the biotech isn't really a marijuana stock, Corbus does focus on synthetic cannabinoid drugs.

So what

Volatility is par for the course with clinical-stage biotech stocks. Nothing about today's big drop alters the fundamental reasons for investors to buy -- or to stay away from -- Corbus.

The reality is that Corbus still appears to be in much better shape than it was just two days ago. Corbus' deal -- with Jenrin Discovery --dramatically improves the company's pipeline.

Mark Tepper, Corbus' president, said that the pipeline could "support the advancement of one to two new drug candidates into clinical testing each year starting in 2020."

If Tepper is right, it's fantastic news for Corbus. Before the deal with Jenrin, Corbus had only one candidate in its pipeline: lenabasum. Now the company owns another experimental drug, CRB-4001, that will begin phase 1 clinical testing next year plus a promising pre-clinical library.

Now what

What's next for Corbus? The biotech is evaluating lenabasum in an important phase 3 clinical study for treating systemic sclerosis, a rare autoimmune disease. This study is scheduled to wrap up in 2020. Corbus also plans to start another phase 3 study for lenabasum in treating dermatomyositis by the end of 2018.

The company's prospects still largely ride on how lenabasum fares in these late-stage studies. However, the addition of CRB-4001, which could be effective in treating nonalcoholic steatohepatitis (NASH) and other diseases, just might be even more important for Corbus over the long run.

It's still really early, though. There's no guarantee that either lenabasum or CRB-4001 will be successful. Still, I think that Corbus is a biotech stock for investors to watch closely.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.