Orphazyme (NASDAQ:ORPH) is getting off to a rough start on Friday, with ORPH stock down more than 50% in pre-market trading. This comes after the Denmark-based biotech company has rocketed higher in recent weeks. In fact, earlier in June, it saw more than 1,300% gains in a single trading day. So what is the latest Orphazyme news causing a plunge?
Importantly, there has been no real company news driving the movement in Orphazyme. The biotech company actually clarified that it did not understand the rapid gains. Instead, it seems that a healthy dose of social media speculation fueled the rise on ORPH stock.
However, there was a real basis for this speculation. Much of the Orphazyme story right now rests on arimoclomol, its lead drug candidate. The company is hoping to receive U.S. Food and Drug Administration approval for the use of this drug to treat Niemann-Pick Disease Type C. For those unfamiliar, this is a rare genetic condition in which the body is unable to transport cholesterol and other fatty substances within the cells. It is typically degenerative and can often be life-threatening.
It seems then that much of the speculation — and the 1,300% gains — came from a June 17 catalyst for arimoclomol. That is because the FDA had announced a PDUFA date of June 17 for the drug, essentially a deadline by which to make a decision on the application.
For investors then, the days leading up to June 17 were a chance to bet on a positive answer for Orphazyme.
The Big ORPH Stock News Today
Unfortunately, everything did not go as planned for Orphazyme and new ORPH stock holders. This morning, the company shared an update via its corporate website. Instead of confirming that the FDA had approved its application for arimoclomol, it said it needed to provide more information to regulators.
More specifically, Orphazyme announced that it received a complete response letter (CRL) from the FDA. In this letter, regulators said they needed more quantitative and qualitative data to make a decision on the application for arimoclomol. They are looking for results beyond those from the Phase 2/3 clinical trial.
So what comes next? Unfortunately, the path ahead sounds rocky for Orphazyme. The company said that through the end of the year, it will be focusing efforts on regulatory approval in the European market. Additionally, it said it will reassess its partnership with the FDA. Perhaps the most important part is that the company says it will “reduce our costs substantially and freeze all company efforts not related to clinical and regulatory activities to support approval for NPC.”
Keep a close eye on ORPH stock today. With this disappointment, it seems investors can expect further volatility in Orphazyme until it can share a positive update.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Sarah Smith is the Editor of Today’s Market with InvestorPlace.com.