What happened

Shares of Solid Biosciences (NASDAQ:SLDB) fell more than 73% today after the company announced preliminary data for its gene-therapy candidate SGT-001 in Duchenne muscular dystrophy (DMD). The initial results indicated the starting dose only induced low levels of the protein microdystrophin, which is intended to be overexpressed by the gene therapy. Analysts are interpreting that as a sign the gene therapy is a bust, although the company said it intends to investigate higher doses of the drug candidate.

The company doesn't seem fazed by the news today, as the data are from just three patients and the ongoing trial was designed from the start to investigate higher doses. Mr. Market seems less willing to overlook the risk, especially since SGT-001 is the company's lead drug candidate and only clinical asset. The stock previously rode the promise of the gene therapy candidate higher, but that relationship works both ways.

As of 10:44 a.m. EST, the stock had settled to a 67.2% loss.

A scientist in the lab with a disappointed look on his face.

Image source: Getty Images.

So what

DMD is a debilitating disease caused by a mutation in the gene encoding the protein dystrophin, which allows muscle fibers to function properly. Without it, muscles weaken over time and waste away. While the up-and-coming field of gene therapy holds promise for DMD, the dystrophin gene is the longest gene in the human genome. That poses a problem for corrective therapies, since a working copy of the gene is simply too large to deliver to cells with today's drug-delivery technology.

To get around that obstacle, scientists engineered a new gene called microdystrophin, which, as the name implies, is small enough to be delivered into cells. Now companies such as Solid Biosciences only have to navigate the myriad remaining obstacles of gene therapy development. What's the best delivery method? How can gene expression be maximized? Can the gene therapy be manufactured at scale?

Solid Biosciences thinks its delivery method (adeno-associated virus, or AAV) will provide advantages both for patients and in manufacturing a potential marketed product, but it has to be proven safe and effective first. Investors will now anxiously await results from higher doses of SGT-001.

Now what

Solid Biosciences ended September 2018 with $129 million in cash and cash equivalents, which it thinks will be enough to last through the first quarter of 2020. That makes this a highly risky, binary stock. Either higher doses of SGT-001 show promise before the company's cash runs out, or the gene therapy fails and the biotech's options run out. Investors should probably steer clear of this one.

Maxx Chatsko 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.