What happened

Shares of Anika Therapeutics Inc (NASDAQ:ANIK), a small-cap biotech focused on regenerative medicine, were down 36% as of 11:10 a.m. EDT on Tuesday. The stock plummeted after the company reported data from an important phase 3 study.

So what

The trial in question is called CINGAL 16-02. This phase 3 study was testing Anika's drug Cingal -- which is a combination of cross-linked hyaluronic acid (HA) and triamcinolone hexacetonide (TH) that is approved in Europe -- in comparison to TH alone treating patients with osteoarthritis (OA) in the knee. The primary endpoint of the 26-week study was to show a reduction in pain. 

Unfortunately, the results failed to show that using Cingal led to a statistically significant reduction in pain.

Falling stock chart superimposed over digital map of the world

Image source: Getty Images.

Dr. Laszlo Hangody, the principal investigator of the trial, offered investors the following commentary:

While it has been observed that TH has a longer duration of effect than other corticosteroids, the results in this study were surprising. Nevertheless, the patient response to CINGAL in this study was strong as patients received statistically and clinically meaningful rapid and long-lasting improvement in symptoms compared with base-line, consistent with the previous study as well as my experience in my practice. Taken together, the results of the two Phase III studies validate the effectiveness of this novel combination for use in patients with knee osteoarthritis.

Anika CEO Joseph Darling did his best to stay positive in light of the news:

OA patients continue to benefit from the proven safety and efficacy of CINGAL in growing numbers outside of the U.S. where CINGAL is approved. The benefits of combining HA and a corticosteroid are mirrored by physician feedback and real-world experience. While we expected CINGAL to perform as well as it did, we were surprised that the difference in pain reduction seen in this trial did not reach statistically significant levels at six months. We will however, continue to monitor the results of the ongoing 3-month extension study. We are actively reviewing the data and our plan is to work closely with regulators to come to an understanding of the next steps required to gain U.S. regulatory approval of CINGAL. We remain fully committed to bringing this impactful OA solution to U.S. patients and physicians.

To make matters worse, analysts at both Barring Research and First Analysis downgraded Anika stock in response to the disappointing clinical news. 

Given the clinical update and pair of analyst downgrades, it isn't surprising to see shares being mauled today.

Now what

2018 has been a rough year for Anika shareholders. Investors have had to deal with a change in leadership, a voluntary product recall, a downward revision to guidance, and now disappointing clinical news. It's no wonder why the share price has fallen off a cliff in recent months:

ANIK Chart

ANIK data by YCharts.

While it is possible that today's drop could represent a buying opportunity for patient investors, I have a hard time feeling confident in the company's prospects given the recent flow of news. That's why my plan is to root for Anika's success from the safety of the sidelines.

Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.