What happened

Shares of CymaBay Therapeutics (NASDAQ:CBAY) fell over 76% today after the company announced that it was halting the development of its lead drug candidate, seladelpar, in primary biliary cholangitis (PBC). The company also announced that it had decided to terminate the development of the drug compound as a potential treatment for nonalcoholic steatohepatitis (NASH) and primary sclerosing cholangitis (PSC). 

CymaBay Therapeutics made the decision after doctors uncovered atypical histological findings in the first batch of liver biopsies taken from patients participating in the phase 2b NASH study. The news suggests that seladelpar may be causing unintended changes to the structure of tissues in the liver. 

As of 3:09 p.m. EST, the pharma stock had settled to a 76.2% loss.

A finger tracing a falling stock chart on a touchscreen.

Image source: Getty Images.

So what

Today's news is a major setback for CymaBay Therapeutics. In early November, the company announced it had reached full enrollment of a phase 3 trial evaluating seladelpar in the treatment of PBC. That would have put the 52-week trial on pace to announce top-line results in early 2021 and, potentially, let investors know if the business was on the cusp of commercializing its first product. Meanwhile, the phase 2b study in NASH was expected to have results in the second quarter of 2020.

Those timelines are no longer valid. And investors are now left to wonder what comes next. CymaBay Therapeutics only has two other drug candidates in development aimed broadly at "gut and liver" indications. The most advanced is only in a phase 1 trial.

Now what

The only silver lining for investors is that CymaBay Therapeutics ended September with $218 million in cash, which provides a relatively comfortable cushion for the company to pivot its pipeline. That won't be nearly enough to bring new compounds from discovery to preclinical studies to clinical trials, but it's a good start, especially if the business can limit operating expenses in the near term. That sum is also considerably more than the company's market valuation of just $90 million. Then again, investors need a lot more information about the next steps before finding the opportunity in this stock's plunge.