Orphazyme became the latest GameStop in the lead up to a key FDA decision over the past two weeks, with the shares shooting up to $77 apiece at one point. But now, the FDA has officially rejected the Danish biotech's Niemann-Pick disease type C (NPC) drug candidate arimoclomol, sending the shares crashing back to Earth.
The FDA has rejected the therapy and asked Orphazyme to provide additional data on the benefits and risks of the heat shock protein amplifier, leading the company to cut costs as the next steps are considered.
Shares in Orphazyme went on a roller coaster ride in the run-up to the FDA decision, surging from around $5 to $77 at one point last week amid heavy chatter about the biotech on Reddit. The stock quickly fell back down, but was still trading around $15 ahead of the FDA decision. The company addressed the volatility in a press release June 11, saying they had no idea what was causing the trading volume to skyrocket.
"Investors who purchase the company’s ADS or shares may lose a significant portion of their investments if the price of such securities subsequently declines," the statement warned.
Now, with the FDA issuing a complete response letter, the stock is down around $6.
The statement released by Orphazyme suggests there is no quick fix for the FDA's request. In a statement to disclose the setback, Orphazyme said the FDA had asked for more evidence on the validity and interpretation of its primary endpoint along with additional data to support a benefit-risk assessment.
Orphazyme sought approval on the strength of a single phase 2/3 trial that enrolled 50 patients with the rare neurovisceral disease NPC. The study linked arimoclomol to an improvement over placebo in disease severity. The FDA wants more information on the endpoint and the benefit-risk profile before approving arimoclomol.
“The FDA has clearly stated that their CRL is really based at the moment on needing additional qualitative and quantitative evidence,” Orphazyme CEO Christophe Bourdon said on a conference call with investors. “On the additional evidence, beyond clinical, there could be some kind of also, for example, pharmacodynamic data, but at this stage it's very important for us to ensure that we find the most constructive path forward with the FDA.”
Orphazyme will be burning through money while it figures out how to get the drug into the U.S. market. The biotech is set to freeze all efforts not related to clinical and regulatory activities that could support approval in NPC but still expects an operating loss to total up to DKK 700 million ($112 million), compared to up to DKK 150 million under its prior forecast.
The setback comes one month after arimoclomol failed a phase 3 clinical trial in amyotrophic lateral sclerosis. Orphazyme is still hoping to win approval in NPC in Europe in the first quarter of next year.