Why the Paradigm (ASX:PAR) share price is sinking 14% on Tuesday

This biotech share is having a day to forget…

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The Paradigm Biopharmaceuticals Ltd (ASX: PAR) share price is under significant pressure on Tuesday morning.

At the time of writing, the biopharmaceutical company’s shares are down 14.5% to $1.90.

This decline means the Paradigm share price is now down 35.5% over the last 12 months.

Why is the Paradigm share price crashing?

Investors have been selling down the Paradigm share price on Tuesday following the release of an update on the Investigational New Drug (IND) application it submitted to the US Food and Drug Administration (FDA) in March.

As you might have guessed from the weakness in the Paradigm share price, the update was not an overly positive one.

What’s been happening?

In June, Paradigm submitted a response to the FDA’s six questions relating to Paradigm’s IND submission.

According to today’s announcement, the company has now received a written response from the US FDA. This reveals that the regulator has accepted Paradigm’s responses to five of its six questions.

As a result, the FDA requires further clarification on one remaining question. This is in regard to the non-clinical interpretation and clinical mitigation relating to one of Paradigm’s recently completed GLP non-clinical toxicology studies.

Paradigm notes that it conducted 26 non-clinical studies in 2020 at the request of the US FDA. Of the 26 non-clinical studies conducted, the FDA is seeking clarification on only one rat study.

Paradigm will now work with expert clinical and non-clinical consultants to prepare a response. It anticipates this will be submitted within a month.

Paradigm’s Chief Medical Officer, Dr Donna Skerrett, remains optimistic that this outstanding question can be resolved.

She explained: “For new indications that impact large populations, such as osteoarthritis, a thorough and iterative process with the FDA for initiating the pivotal registration studies is common practice. Even though the pace of progressing the clearance process has been slowed due to COVID-19 resulting in all communications being written, we are confident that we can address the FDA’s one remaining question. We look forward to resolving the one outstanding question with the FDA and moving froward with our pivotal program in the US, Europe and Australia.”

However, judging by the Paradigm share price performance today, some investors aren’t as confident as the company is.

Should you invest $1,000 in Paradigm right now?

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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