What happened

Shares of Ampio Pharmaceuticals (NYSEMKT:AMPE) were tanking by 18.6% as of 3:42 p.m. EST on Tuesday. The big drop came after the company announced that it had received feedback from the U.S. Food and Drug Administration (FDA) on proposed modifications to the special protocol assessment (SPA) for its AP-013 late-stage study of Ampion in treating severe osteoarthritis of the knee.

Under the FDA's SPA process, companies are allowed to discuss the designs of clinical trials with the FDA to ensure that they meet all of the criteria to support regulatory approval. Ampio stated that the FDA provided guidance that gives the company options allowing it to complete its late-stage study of Ampion without rerunning the trial. 

Man wearing a coat and tie holding blocks spelling FDA in his hand

Image source: Getty Images.

So what

Ampio said that it viewed the FDA's response favorably. So why did the biotech stock fall so much? There's still quite a bit of uncertainty related to its AP-013 study. Investors don't like uncertainty.

The late-stage study was originally supposed to enroll over 1,000 patients. However, the COVID-19 pandemic presented a major challenge for Ampio in including such a high number of participants in the trial. The company said it feels it will be able to demonstrate the safety and efficacy of Ampion in treating severe osteoarthritis of the knee with far fewer patients.

Ampio is taking on a significant risk if it decides not to add more patients, though. It's possible that the company proceeds with the AP-013 study only to determine that there weren't enough patients to achieve statistically significant improvement. If that happens, the entire study would have to be rerun with more patients -- delaying the approval process.

The company could choose to add more patients with an add-on trial. It would need to ensure that the pandemic doesn't negatively impact any aspect of the collection or analysis of data. However, this isn't an option that Ampio wants to pursue at this point.

Now what

Ampio said that it's "considering all options and is working to find a solution that will allow us to proceed despite COVID-19 and will present our analysis and proposal to the FDA as soon as possible." Its stock is likely to remain volatile until that solution is finalized.

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