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Why the Botanix share price could crash lower on Wednesday

It looks set to be a disappointing day of trade for the Botanix Pharmaceuticals Ltd (ASX: BOT) share price on Wednesday.

The cannabis-focused medical dermatology company’s shares look set to be sold off after a disappointing study result.

What did Botanix announce?

Late on Tuesday night the company released topline data from its Phase 2 BTX 1503 study. This study was evaluating its safety and efficacy in patients with moderate to severe acne and preparations for a Phase 3 clinical program.

Expectations were high that BTX 1503 could become the new standard of care for acne sufferers, replacing existing treatment options that come with horrific side effects.

According to Botanix’s release, its 12-week randomised, double blind, vehicle-controlled study enrolled 368 patients with moderate to severe acne across 35 dermatology sites in Australia and the USA.

Unfortunately, the topline data revealed that the primary endpoint (aim) of reducing inflammatory lesions did not achieve statistical significance.

And while the secondary endpoint of reducing non-inflammatory endpoints was statistically significant, the primary endpoint is the one that matters. Especially given that other promising drugs under development are also aiming to leverage the antimicrobial properties of synthetic cannabidiol in a similar way.

However, there is a glimmer of hope for Botanix and its shareholders. While its result was not statistically significance, management blamed this on an abnormally positive result from a placebo group. Discounting this, the result is potentially a positive.

Vince Ippolito, President and Executive Chairman of Botanix said: “We are pleased with the overall efficacy outcomes, clean safety profile and highly significant Australian data. We are very thankful to all of the investigators and patients who helped Botanix rapidly complete this Phase 2 study.”

What now?

Management appears intent on trying to commercialise the product despite this disappointing result.

It advised that “Botanix is moving forward with its preparations for Phase 3 clinical program and planning an end-of-Phase 2 meeting with the US Food and Drug Administration.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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