What happened

Shares of DBV Technologies (DBVT 0.25%), a clinical-stage biopharmaceutical company, took a sharp turn for the worse today. Investors reacting to disappointing news about the development of Viaskin Peanut, its treatment for those with peanut allergies, pushed the stock 37.8% lower as of 11:16 a.m. ET on Tuesday.

So what 

DBV Technologies stock is tanking today because the company told investors that it would have to run another large and expensive phase 3 trial before its lead candidate, the Viaskin Peanut patch, has a chance of approval from the Food and Drug Administration (FDA). The company also withdrew a pending application in front of the European Medicines Agency for the same reason.

Unhappy investor checking stock prices.

Image source: Getty Images.

Back in 2020, the company received a complete response letter from the FDA regarding its application for the Viaskin Peanut patch. In its rejection, the agency cited adhesion issues with the patch, which the company addressed with a modified, larger patch.

In January, DBV Technologies told investors it could probably get away with a modified patch without having to run a new phase 3 trial.

Now what

The FDA isn't necessarily opposed to reusing data from the first pivotal trial with the smaller Viaskin Peanut patch to prove safety and efficacy. That said, there are some important caveats. First, DBV Technologies needs to prove patients' skin actually absorbs the contents of the new patch as well as before. Plus, the company needs to find a way to prove the modification doesn't have a negative effect on safety or efficacy. 

You don't need to know much about how the FDA operates to know it would be easier to just run a new phase 3 trial with the modified patch. Instead, DBV Technologies spent most of 2021 convincing its shareholders this wouldn't be the case. With this in mind, it's probably best to avoid this biotech stock for the foreseeable future.