Sionna's cystic fibrosis drug candidate fails in trial; stock craters 90%

Shares of biotech Sionna Therapeutics, which was spun out of pharma giant Sanofi in 2019, plunged more than 90% on Monday. The company reported the unexpected failure of its experimental treatment for cystic fibrosis, a genetic disease that affects the lungs.

Sionna plummeted 91.2% on the Nasdaq on Monday to $4.50 per share, their lowest level since they began trading. The stock was up around 0.2% in premarket trading on Tuesday as of this writing.

Markets were reacting to the company’s announcement that its experimental cystic fibrosis drug SION-719 had failed in a clinical trial. Cystic fibrosis is a genetic disease that causes mucus, sweat, and digestive juices produced by the body to become extremely thick. This impairs the functioning of the lungs, bronchial tubes, and intestines.

Sionna was developing SION-719 as an add-on to Vertex Pharmaceuticals’ Trikafta, the standard of care for cystic fibrosis. However, results from the mid-stage phase II-a trial showed that adding the experimental drug to standard-of-care therapy did not produce a meaningful reduction in sweat chloride levels. This is a key marker of treatment success.

“We are disappointed in the unexpected results from the phase II-a trial,” Sionna CEO Mike Cloonan said in the press release. Based on that data, the company will not continue developing SION-719 as an add-on to Trikafta, Sionna said.

Sionna was spun out of pharma giant Sanofi in 2019 specifically to develop treatments for cystic fibrosis. Unlike many biotechs, the company has several potential drug candidates in its pipeline, meaning the failure of SION-719 is not a death sentence, Barron’s noted.

Nevertheless, the setback will force Sionna to manage its financial resources carefully, Barron’s points out. The company ended the second quarter with around $268.3 million in cash, cash equivalents, and marketable securities and intends to “take actions to preserve capital,” according to the press release.

Sionna’s path forward is far murkier, according to Barron’s. RBC Capital believes investor expectations “are now effectively washed out of the stock,” Barron’s reported.

The stock has nine “hold” ratings from Wall Street analysts versus two “buy” calls, according to MarketWatch data. Three months ago, it had nine “buy” ratings, one “hold,” and one “sell.” The average target price currently stands at $33.86 per share, 7.5 times the last closing price.

Sionna’s setback is good news for Vertex, Barron’s writes. Just a few years ago, the drugmaker competed with pharma giant AbbVie in developing a cystic fibrosis treatment, but AbbVie’s drug failed. Following the two setbacks, Vertex has “a clear line of sight to material free cash flow generation” over the next decade and a half, William Blair analysts said, as quoted by Barron’s. Vertex shares jumped 5.6% on Monday and were up another 2% in premarket trading on Tuesday.