What happened

Shares of Concert Pharmaceuticals (NASDAQ:CNCE), a clinical-stage biotechnology company, dropped 38% as of 3:30 p.m. EST on Friday. The double-digit swoon is traceable to the release of downbeat clinic results from an important phase 3 trial.

So what

Concert's licensing partner Avanir Pharmaceuticals announced phase 3 data today from a trial evaluating a drug called AVP-786 as a treatment for agitation in patients with Alzheimer's dementia. The study was designed to test the efficacy, safety, and tolerability of the drug.

Unfortunately, the study failed to meet its primary and key secondary endpoints. Specifically, patients who used AVP-786 did not show a statistically significant improvement in agitation when compared with the placebo group.

This is bummer news for Concert because it could have received millions in milestone payments and royalties if AVP-786 went on to become a hit drug.

BUsinessman being punched in the face

Image source: Getty Images.

Avanir's CEO stated: "We will continue to analyze the full set of data from the first two studies of the company's phase 3 clinical development program, and explore the best path forward."

Given the news, it is understandable why shares are being mauled today.

Now what

This clinical trial proves yet again just how hard it is to create drugs that treat Alzheimer's disease

The good news for investors is that Concert has other irons in the fire. Two other compounds are still in clinical development, most notably CTP-543, which is entering phase 3 trials as a hopeful treatment for alopecia areata in the near future. AVP-786 is also currently in a phase 2 trial as a hopeful treatment of certain neurologic and psychiatric disorders.  

Concert has $136 million in cash on the balance sheet as of the end of the second quarter, so it has enough financial resources to continue to move forward for a little while. But this clinical-stage biotech is still a very speculative investment, so bulls should proceed with caution.