What happened

Shares of Aclaris Therapeutics (ACRS 0.85%) fell over 49% today after the company reported that one of its most important drug candidates, ATI-502, failed to meet primary and secondary endpoints in a phase 2 trial. The topical treatment was being studied in alopecia areata, also called male (or female) pattern baldness.  

The mid-stage trial evaluated two groups of patients: those applying a topical containing ATI-502 and those applying an identical topical without ATI-502. The latter is called the vehicle group, which is akin to the placebo group. Strangely, a high number of patients applying the vehicle achieved disease resolution, which is what kept the drug candidate from achieving statistical significance in comparison.

As of 12:35 p.m. EDT, the stock had settled to a 48.5% loss.

A man holding his head in his hand stands next to a declining chart.

Image source: Getty Images.

So what

Today's news isn't being taken lightly by investors -- and for good reason. As it turns out, comparator arms in clinical trials evaluating topical drug candidates are called "vehicles" instead of "placebos" because the vehicle actually increases the delivery and efficacy of active pharmaceutical ingredients. 

The results of the latest study suggest ATI-502 might not be the thing in the drug formulation that's promoting hair regrowth in individuals. The results also throw cold water on data from a separate phase 2 trial announced 10 days ago, which showed ATI-502 triggered an average of 15.3 hairs per square centimeter for women and 5.6 hairs per square centimeter for men. However, that was an open-label trial, meaning there wasn't anything to compare it to. 

Now what

Aclaris Therapeutics will have to figure out how to regroup from the recent results. Will that require additional clinical studies? Is the company's approach of using topical Janus kinase (JAK) inhibitors doomed to fail? It's too soon to say, but it's never a great sign when the placebo outshines your drug candidate.