What happened

Shares of Arbutus Biopharma Corp. (NASDAQ:ABUS) were down 31.2% as of 3:07 p.m. EDT on Tuesday. The clinical-stage biotech provided an update earlier in the day on a change to its executive team and on its hepatitis B virus (HBV) program. 

Arbutus announced that it had hired Dr. Gaston Picchio as its new chief development officer. The bigger story, though, related to the company's HBV pipeline candidates. The good news was that experimental HBV drug AB-506 is advancing in a phase 1 study from being tested in healthy volunteers to being evaluated in HBV patients. In addition, Arbutus stated that a phase 1 study of AB-729 is expected to begin in the second quarter of 2019, and that it will potentially be studied in combination with AB-506 in a clinical study in the second half of next year.

Gloved hand holding flask with dropper in foreground and bottles and test tubes in background

Image source: Getty Images.

However, the bad news for Arbutus was that it's delaying the start of a phase 1 study for AB-452 while further research is conducted into "emerging nonclinical safety findings." The biotech's update on its phase 2 study evaluating RNA interference (RNAi) agent ARB-1467 in combination with pegylated interferon (PEG-IFN) was also concerning. Three out of six patients dosed with ARB-1467 so far aren't able to proceed to dosing with PEG-IFN because they didn't meet predetermined response criteria after six weeks of treatment.  

So what

The hiring of Picchio wasn't enough to move the needle for Arbutus stock. Neither was the progress for early stage candidates AB-506 and AB-729. But the delay for AB-452 hurt since Arbutus had expected the drug to move into phase 1 clinical testing in the fourth quarter of this year. 

Arbutus' worst news, though, was the dismal results so far in the phase 2 combination study featuring ARB-1467. It's the biotech's lead candidate, so the fact that half of the patients dosed so far won't move forward in the clinical study is definitely problematic.

It's possible that the worst is yet to come. Two of the six patients in the study haven't yet progressed to the six-week analysis point. If those patients can't continue to the next part of the study -- dosing with PEG-IFN -- that will leave only one patient with a positive response. 

Now what

Arbutus plans to provide periodic updates on the phase 2 combination study of ARB-1467. Investors will anxiously await news from the two patients who haven't reached the six-week mark yet. The biotech also stated that the study is still open for enrollment, so there's a possibility that additional patients could participate who experience positive responses from taking ARB-1467.

For now, though, Arbutus stock is likely to be highly volatile. A lot more good news and considerably less bad news is needed for this stock to be a strong pick for long-term investors.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.