What happened

Shares of Protagonist Therapeutics (PTGX -2.75%) were plunging 26.3% as of 3:39 p.m. EDT on Monday. The big decline came after the company announced that the U.S. Food and Drug Administration has placed a clinical hold on studies evaluating rusfertide.

So what

The FDA's clinical hold resulted from Protagonist finding both benign and malignant skin tumors in mice in a preclinical study of rusfertide. Protagonist was testing the drug in a phase 2 study targeting treatment of polycythemia vera and other blood disorders.

A physician wearing a face mask is holding a hand up in a halting gesture.

Image source: Getty Images.

Protagonist does have two other pipeline programs in clinical testing, so all of its fortunes don't rest solely on rusfertide. The company is evaluating PN-943 in a phase 2 proof-of-concept study targeting ulcerative colitis. It's also collaborating with Johnson & Johnson on a phase 2 study of PTG-200 in treating Crohn's disease, as well as two other early stage programs.

Still, the clinical hold for rusfertide presents a major setback for Protagonist. The company had intended to report preliminary results from a phase 2 study of the drug in treating hereditary hemochromatosis, a genetic blood disorder that can cause liver disease, by year-end. It also hoped to advance rusfertide into late-stage testing in treating polycythemia vera early next year. Those plans are now up in the air.

Now what

Protagonist stated that it's working with the FDA but didn't provide any estimates as to how long the hold might be in place. The biotech stock seems likely to remain highly volatile until the clinical hold is lifted.