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Here’s why GI Dynamics Inc has crashed 53%

Shareholders of GI Dynamics Inc (ASX: GID) have watched helplessly as their shares have plummeted recently following an unfavourable announcement regarding its key product, EndoBarrier. The stock has crashed 6.3% today, giving it a total loss of 53% over the last six days.

GI Dynamics

Source: Yahoo! Finance

Last week, the junior medical device maker emerged from a trading halt which had been requested pending a “material announcement” regarding its business. Unfortunately, it was later confirmed that the US Food and Drug Administration (FDA) had put a hold on enrolment in the company’s ongoing clinical trial of EndoBarrier in the US, requesting further information regarding its risk/benefit profile. An unexpectedly high number of patients had become ill during the trial.

While the setback is certainly being felt by shareholders, investors would have been well aware of the high level of risk involved in biotechnology investments. While some, including Sirtex Medical Limited (ASX: SRX) and CSL Limited (ASX: CSL) have become successful over the years, countless others have resulted in terrible investor losses.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest.

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