Flexion tanks as FDA clamps a hold on its lead osteoarthritis drug

Just months after pulling off a successful IPO, Flexion Therapeutics ($FLXN) is left watching its shares plummet after the FDA forced it to halt a trial on its top prospect.

The agency placed a clinical hold on enrollment and dosing in a Phase IIb study on FX006, a treatment for osteoarthritis of the knee. The FDA is responding to a single occurrence of infection in the trial, according to Flexion, and the company said it got word from regulators on Tuesday but has yet to receive a written notice.

The news sent Flexion's shares down roughly 30% in after-hours trading, as a blow to the biotech's most advanced asset spooked investors expecting the company to launch a Phase III study on the drug before year's end.

Flexion remains light on details related to the hold, CEO Michael Clayman said, and the company has scheduled a conference call for Thursday morning to further discuss the issue.

Michael Clayman

"We will work closely with FDA to provide the agency with all appropriate information and data required to expedite their review and evaluation of this event," Clayman said in a statement. "Once the FDA has completed its review, we can better assess the impact this clinical hold will have on our development program timeline for FX006."

The drug is a sustained-release steroid treatment designed to relieve moderate to severe osteoarthritic pain in the knee. In previously disclosed results from the Phase IIb study, FX006 significantly beat out standard of care, and Flexion was racing toward late-stage trials, announcing earlier this month that it was a year ahead of schedule and on track to wrap up Phase III next year.

Beyond the damage done to Flexion's market cap, the clinical hold doesn't affect FX005, a Phase II treatment for end-stage osteoarthritis, or FX007, a preclinical candidate for postoperative pain.

- read the statement

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