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Why Cyclerion Therapeutics Is Crashing Today

By George Budwell – Oct 14, 2020 at 1:09PM

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A second midstage failure is hurting the biotech's stock price today.

What happened

Shares of clinical-stage biotech Cyclerion Therapeutics (CYCN -5.47%) are down by an eye-popping 48% as of noon EDT Wednesday. The small-cap biotech's stock is crashing in response to a negative midstage trial result for its sickle cell disease candidate olinciguat.

Cyclerion didn't share any statistical details from the 70-patient study in today's press release. However, the company did note that the drug's activity did not support further internal clinical development. This event marks the second midstage trial failure for the biotech within a year. 

A man getting punched in the face.

Image source: Getty Images.

So what

Sickle cell disease is a rare blood disorder with limited treatment options. Therefore, olinciguat stood a chance at becoming a rather healthy revenue generator for the company in the years ahead. That promising scenario, though, appears to be completely off with the table in the wake of these disappointing midstage results. Thus, it's easy to understand why investors are backing away from this prerevenue biotech stock today.    

Now what

On the bright side, Cyclerion also announced positive clinical trial news for its early-stage drug candidate IW-6463 this morning. The drug is currently being evaluated as a possible treatment for age-related cognitive decline and neurodegenerative diseases. It reportedly exhibited blood-brain-barrier penetration, desired central nervous system exposure levels, and target engagement in an early-stage trial.

Cyclerion is thus planning to assess the drug across a broad range of central nervous system disorders, including mitochondrial encephalomyopathy, lactic acidosis, and stroke-like episodes. So there is a distinct possibility that the biotech's shares could eventually rebound from today's downturn.  

George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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