What happened

Shares of Australian healthcare company Benitec Biopharma (NASDAQ:BNTC) rose almost 80% this morning after the company announced that it had published data in Nature Communications, an open-access scientific journal, supporting its novel approach to treating oculopharyngeal muscular dystrophy, or OPMD. As of 11:45 a.m. EDT, the microcap stock had settled down to a 55% gain.

The preclinical study demonstrated that faulty genes at the root of OPMD could be silenced and then replaced with working copies through a gene-editing technique known as DNA directed RNA interference, or ddRNAi. Mice that underwent the gene replacement therapy displayed several important benefits including a reduction in muscle fibrosis (the scarring of connective tissue) and returning to normal muscle strength.

A man sitting with his laptop while cash showers down on him.

Image source: Getty Images.

So what

The data from the preclinical mouse model study clearly have investors looking ahead to the prospects of clinical trials with human patients. That's not exactly a stretch, either. In January the company gained Orphan Drug Designation from the European Union using the very same preclinical results and will look to move into a phase 1 trial in the near future. Orphan Drug Designation is applied to drugs treating rare diseases and grants special additional protections if the treatment is eventually commercialized. 

Of course, it's important to remember that Benitec Biopharma and its technology platform are still in the earliest stages of development. It has a history of terminating trials, generates essentially no revenue, reported a net loss of $25 million in fiscal year 2016, and lacks the cash to conduct clinical trials. The company certainly has its work cut out for it.

Now what

Are the preclinical data good enough to overcome those financial shortcomings? It's too early to say. However, although gene therapies hold promise for OPMD, treatments aimed at muscular dystrophies have struggled to demonstrate significant efficacy in clinical settings. Additionally, Benitec Biopharma's treatment depends on a two-step process: 1. knocking down the expression of the faulty gene that causes OPMD, and 2. replacing it with a working copy. That could complicate the delivery of the therapeutic and, therefore, the chances of success in human patients. Investors would be better served watching this microcap stock from a distance.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.