What happened

Shares of biopharma Acorda Therapeutics (NASDAQ:ACOR) dropped as much as 40.1% Wednesday after the company issued an update on its second-leading drug candidate. The company is increasing the frequency it evaluates white blood cell count in patients participating in a phase 3 program (which includes three studies) evaluating tozadenant as a potential treatment for Parkinson's disease. The extra monitoring is being conducted after doctors discovered an increased rate of agranulocytosis, a severe reduction in white blood cell count, which is "possibly drug-related" and is sometimes associated with sepsis and death. White blood cells play a critical role in the body's immune system by fighting off infection.

Acorda Therapeutics noted that to date, approximately 890 patients have been treated with tozadenant and 234 with a placebo. Seven cases of sepsis have occurred, all in tozadenant groups, and four cases were fatal and related to agranulocytosis. The company is currently in discussions with the U.S. Food and Drug Administration and the independent Data Safety Monitoring Board.

As of 12:42 p.m. EST, the stock had settled to a 37.6% loss.

A businessman holding out his hand with a bar chart showing losses hovering over it.

Image source: Getty Images.

So what

Patient safety concerns are never good for a drug candidate or marketed treatment. News such as this can affect potential marketing approval decisions and/or significantly reduce a treatment's approved indications or market potential. Investors aren't taking any chances.

That's because Acorda Therapeutics' lead product, Ampyra, is expected to lose marketing exclusivity in July 2018. The product is expected to generate $535 million to $545 million in revenue this year, which will amount to substantially all of the company's total revenue for 2017. 

To counter the expected threat to revenue in the second half of 2018, the company executed a significant corporate restructuring to focus resources on its late-stage drug pipeline. That includes CVT-301, an inhaled product for treating Parkinson's disease that successfully completed multiple phase 3 studies, and tozadenant. Things haven't been going smoothly.

Acorda Therapeutics submitted a New Drug Application (NDA) to the FDA earlier this year, but the FDA responded with a Refusal To File (RTF) letter stating the NDA contained insufficient information for the agency to complete a review. The pair are in discussions to resolve the issues raised in the RTF. Of course, Wednesday's news means the company's top-two drug candidates are stumbling at a critical time.

Now what

It's very important for the company to begin diversifying revenue with new products, which explains why investors are skittish over recent events affecting the leading drug candidates. Unfortunately, there's not much investors can do at this point except remain patient or move on from Acorda Therapeutics stock altogether. The uncertainty surrounding how things will play out definitely increases the risk involved with an investment.

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