What happened

Shares of CymaBay Therapeutics (NASDAQ:CBAY) fell as much as 56.5% today after the company reported interim data from an ongoing phase 2b clinical trial evaluating its lead drug candidate, seladelpar, as a treatment for nonalcoholic steatohepatitis (NASH). At the 12-week mark, the drug candidate did not demonstrate a significant reduction in liver fat compared to placebo. 

While reductions in markers of liver injury were clinically meaningful, Wall Street doesn't think that alone will make seladelpar stand out within the highly competitive NASH market. The company said the phase 2b trial will continue to the 52-week mark.

As of 12:00 p.m. EDT, the stock had settled to a 46.4% loss.

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So what

CymaBay Therapeutics was considered a promising player in the NASH landscape, but the apparent ineffectiveness of seladelpar in reducing liver fat -- the primary goal of experimental NASH treatments -- appears to have dashed those hopes. However, there could be a silver lining to the interim data.

The fact that seladelpar appears to have a clinically meaningful benefit in reducing markers of liver injury provides reason for optimism when it comes to two separate clinical trials underway in primary biliary cholangitis (PBC) and primary sclerosing cholangitis (PSC).

Consider that a phase 3 trial in PBC has a primary endpoint of reducing levels of a liver biomarker called alkaline phosphatase at least 15%. In the phase 2b trial for NASH, levels of the biomarker were reduced 19.1% from baseline at the dose being evaluated in the pivotal study for PBC.

Now what

Dose-dependent reductions in three additional liver damage biomarkers were observed at the 12-week mark for the ongoing phase 2b trial. Therefore, even if seladelpar isn't effective in reducing liver fat, there could still be a future for the drug candidate in liver diseases. That might even include NASH, if only as an add-on treatment.

That said, there is one problem for CymaBay Therapeutics: time. The phase 3 trial for PBC isn't expected to have top-line data until 2021. While the business exited March with $265 million in cash -- enough to fund operations into 2021 -- patience isn't the most abundant virtue on Wall Street.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.