What happened

Shares of tiny biopharma Marinus Pharmaceuticals (NASDAQ:MRNS) fell nearly 18% today after the company announced full-year 2017 financial results and provided a business update. The $180 million company doesn't have any revenue to speak of, so the earnings release was more customary than useful to shareholders. The business update had the most significant impact, however. 

That's because management decided to delay the readout of preliminary results from an important phase 2 program evaluating its drug candidate ganaxolone in postpartum depression to the third quarter of 2018. Marinus Pharmaceuticals previously told investors to expect the data by the end of March. The worry of Wall Street analysts is compounded by the fact that Sage Therapeutics is developing a competing drug candidate that already had a slight lead on the tiny biopharma's pipeline asset. 

As of 12:36 p.m. EST, the stock had settled to a 16.1% loss.

A chart with arrows pointing up and down drawn on a chalkboard showing a sudden drop.

Image source: Getty Images.

So what

Marinus Pharmaceuticals was one of the best-performing biopharma stocks in 2017. That's really because it started off last year being largely overlooked by investors, sporting a market cap of less than $20 million. A few promising trial updates put the company on the radars of investors -- and even secured it a spot in the NASDAQ Biotechnology Index.

But the company's stock has played little brother to that of Sage Therapeutics. When the larger competitor's SAGE-217 announced positive top-line results in a phase 2 trial in major depressive disorder at the end of December 2017, shares of Marinus Pharmaceuticals rose over 41%. That's because the drug candidates of both companies could represent an entirely new class of drugs for treating depression, epilepsy, and other central nervous system ailments. It would be the first new class of drugs for those conditions in decades.

Actually, ganaxolone is the only drug in the entire pipeline of Marinus Pharmaceuticals. So while the potential for owning one of the most advanced therapies in a potentially new drug class is large, delays encountered in development sting -- especially when your primary competitor is plowing toward late-stage trials.

Now what

With today's pullback, shares of Marinus Pharmaceuticals are down nearly 45% year to date. That has a lot to do with the stock's epic rise in the final month of 2017, but investors are also coming to terms with the risks involved here. The company has just one drug, owns no experience in developing or marketing products, and just lost the footrace to late-stage trials to its leading competitor.

While neither drug candidate is guaranteed to reach the market, ganaxolone may be racing to catch up to SAGE-217 if and when it does launch commercially, particularly with the recent delay in a mid-stage trial.

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