What happened

Shares of Arrowhead Pharmaceuticals (NASDAQ:ARWR) are getting pummeled in response to bad news for the company's experimental cystic fibrosis therapy. Investors unhappy about a paused clinical trial have beaten shares of the clinical-stage biopharmaceutical company 27.9% lower as of 11:46 a.m. EDT on Friday. 

So what 

Today, Arrowhead Pharmaceuticals told investors it was voluntarily pausing an early-stage safety study of ARO-ENaC and healthy volunteers. Signals of lung inflammation among rats in a separate chronic toxicology study were the reason for the pause.

Three people with concerned expressions looking at a laptop.

Image source: Getty Images.

Arrowhead Pharmaceuticals designed ARO-ENaC to knock down the production of ENaC, a protein that contributes to airway dehydration for people with cystic fibrosis. Like all of Arrowhead's new drug candidates, this is a strand of RNA that interferes with the production of a troublesome protein. This one really stands out, though, because it's the first from Arrowhead to be inhaled.

In the past, experimental treatments to prevent the production of ENaC entered circulation and ended up damaging kidneys. As a larger drug unlikely to pass through lung tissue and into circulation, it seemed like ARO-ENaC had a good shot. 

Now what

While a setback in cystic fibrosis is disappointing, this looks like an opportunity to buy shares of a great biotech company at a relative discount. That's because today's setback isn't indicative of a larger problem with Arrowhead's entire drug development platform. The FDA has already approved three RNA interference drugs from Alnylam Pharmaceuticals (NASDAQ:ALNY) to treat different diseases, and their uptake has been strong. Arrowhead still has eight more RNA interference candidates in clinical-stage testing that aren't inhaled.

Since ARO-ENaC is designed to be inhaled by cystic fibrosis patients who already have trouble breathing, any risk of lung trouble -- even among rats -- is taken seriously. Arrowhead will wait for more data from tests on rodents and results from ongoing toxicology studies with monkeys before deciding to scrap the program or keep moving.

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.