You'd think "approvable" or even "not approved" would be the worst thing a drug developer could hear, but there are two words that are even worse: "clinical hold."

Those two words sent Dynavax Technologies (Nasdaq: DVAX) stock into a tailspin today, after the company and marketing partner Merck (NYSE: MRK) announced last night that the FDA had put a hold on the development of their hepatitis B vaccine, Heplisav.

The agency put the hold on the drug's development because one subject in the phase 3 trial was "preliminarily diagnosed" with Wegener's granulomatosis, an inflammation of blood vessels that is quite uncommon.

It is unlikely that the drug caused the disease, but proving that to the FDA might be difficult. In the best-case scenario, the companies might be able to prove that the subject had the disease before being injected by showing that the subject's preimmunization blood sample contained antibodies associated with the disease. In the worst-case scenario, the FDA might require heavy monitoring of any other trials the duo runs, but I doubt that the agency will nix the program due to one temporal event.

In either case, we're talking about a delay of several months at least. The good news is that all the subjects in the phase 3 trial have been dosed, so the trial results should still be available in the middle of this year. Dosing for a phase 2 trial for end-stage renal disease will have to be stopped until the FDA is satisfied that subjects aren't being hurt by the vaccine. The hold also affects two investigational new drug applications to expand the trials to other types of patients.

Frankly, I don't understand the 50% drop that investors have given Dynavax today. After dosing 2,500 individuals, it's possible if not probable that someone would come down with something after getting the vaccine. Unfortunately for Dynavax the "something" was serious enough to cause a clinical hold, but a few months' delay should not cause investors to panic as much as they have.

With Merck funding the development of Heplisav and AstraZeneca (NYSE: AZN) funding two other programs, Dynavax estimates it has about two years of cash remaining. I think that's plenty of time to get this clinical hold sorted out.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool's disclosure policy just likes to be held.