What happened

Shares of the clinical-stage cell therapy company Bellicum Pharmaceuticals (BLCM) are in free fall on Wednesday.

The biotech announced that the U.S. Food and Drug Administration (FDA) placed a clinical hold on its lead product candidate BPX-501 that's being assessed as an adjunct T-cell therapy administered after haploidentical hematopoietic stem cell transplant. The hold reportedly stems from three cases of potentially treatment-related encephalopathy (abnormal brain function) that occurred during an ongoing trial. Bellicum's shares are down by 33.5% at 10:11 a.m EST on heavy volume in response to this news.

A chalkboard chart illustrating a downward trajectory.

Image source: Getty Images.

So what

This clinical setback may be the beginning of the end for Bellicum. The company has staked the bulk of its value proposition on producing a safer adoptive cell therapy than the current industry leaders. So, a serious safety issue like encephalopathy -- if shown to be treatment-related -- would be a big blow to Bellicum's claim of developing a "best-in-class" adoptive cell therapy.

Now what

Per its press release after the Tuesday's closing bell, Bellicum noted that this FDA clinical hold did not impact BPX-501's ongoing pivotal trial in Europe. However, this silver lining, if you will, may not matter all that much to current shareholders due to the company's deteriorating financial position.

Bellicum was almost certainly going to tap the public markets in a big way to shore up its balance sheet soon. As the company is now probably going to have to execute a sizable secondary offering at a significantly lower share price, the dilutive impact on shareholders will be even greater. As such, this speculative biotech stock is best avoided until the inevitable capital raise occurs, and this clinical hold is favorably resolved.