Why Akero Therapeutics Stock Is Crashing Today

What happened

Shares of Akero Therapeutics (AKRO 4.28%) were crashing 66.5% lower as of 11:09 a.m. ET on Tuesday. The steep decline came after the company announced interim results from a phase 2b clinical study evaluating efruxifermin (EFX) in treating patients with compensated cirrhosis due to nonalcoholic steatohepatitis (NASH).

Akero reported that 22% of patients receiving a lower dose of EFX and 24% of patients receiving a higher dose experienced an improvement of at least one stage in liver fibrosis with no worsening of NASH by week 36. However, this improvement wasn't statistically significant compared to the results for placebo. This failure caused investors to bail on the biotech stock.

So what

In its press release announcing the data, Akero referred to the 36-week analysis as "encouraging." Why? There actually was some good news mixed with the bad news.

A solid majority of patients receiving EFX (63% for the low-dose group and 60% for the high-dose group) experienced NASH resolution. This did reflect a statistically significant improvement over the 26% of patients on placebo who experienced NASH resolution.

Stephen Harrison, the study's principal investigator and founder of Pinnacle Clinical Research, stated that the latest results "are the strongest data set reported to date in a placebo-controlled trial in the difficult-to-treat population of patients with cirrhosis due to NASH." Leerink Partners analyst Thomas Smith agreed with that take in a report following Akero's announcement. 

However, the fact remains that EFX didn't meet the primary endpoint of the phase 2b study. Akero will likely have a hard time convincing the majority of investors that today's news was positive.

Now what

The phase 2b study is ongoing. Akero hopes to show additional improvement after 96 weeks of follow-up. Even if future clinical results are stronger, the company could face stiff competition. Rival 89bio is also developing a NASH drug that has demonstrated fewer side effects and is taken every two weeks compared to weekly for EFX.