What happened

Shares of mid-cap rare disease drugmaker PTC Therapeutics (NASDAQ:PTCT) fell by as much as 12.3% in early morning action today. The biotech's stock is responding poorly to the latest clinical update for the experimental spinal muscular atrophy (SMA) treatment risdiplam. Roche is presently developing the orally administered therapy under a licensing agreement with PTC Therapeutics.

Although risdiplam fared well in terms of its overall efficacy, investors are apparently concerned about some of the adverse effects observed in the trial. Specifically, PTC reported that upper respiratory tract infections, nasopharyngitis, pyrexia, headache, diarrhea, vomiting, and cough were all observed in patients treated with risdiplam. The company was quick to point out, however, that the adverse event profile was similar to placebo.

As of 10:34 a.m. EST, PTC Therapeutics' shares were still down by 8.2%.  

Chalkboard chart showing a declining trend line.

Image source: Getty Images.

So what

Why are investors running for the hills? The main issue is that risdiplam will be entering a jam-packed market. Biogen and Novartis both have top-notch SMA treatments, after all. So PTC Therapeutics and Roche arguably need a fairly clean safety profile for their competing SMA offering in order to gain market share. The good news is that investors do seem to be overreacting to this clinical update. None of these adverse events appear to be a dealbreaker, and as the only oral SMA therapy, risdiplam should be able to carve out a profitable niche.  

Now what

The drug is currently under priority review with the Food and Drug Administration, with an action date set for this coming May. As there's nothing overly concerning in this latest clinical data, it might be a good idea to pick up some shares of PTC Therapeutics on this dip.

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.