Shares of Avalanche Biotech (AAVL) are down about 40% in after-hours trade after reporting mediocre phase 2 results in macular degeneration using its gene therapy drug AVA-101. The results were mediocre at best which is why investors are selling off shares in after-hours trade. Avalanche is a gene therapy company that hopes to replace faulty genes with the correct ones in hopes of changing the way proteins are made within the disease. 

The results showed that the company met the primary endpoint of the trial. I think one problem was the way the trial was powered in that they were looking at safety as the primary endpoint of the trial. That would then put efficacy endpoints as secondary endpoints in the trial therefore not giving a clear picture. Regardless, this trial was a phase 2a and the hope here would be that the company could work with the FDA to power the next trial with a substantial primary endpoint to prove the efficacy of the drug. 

The AVA-101 drug did show a modest improvement over the placebo drug compound in the trial. That is because the best corrected visual accuity -- BCVA -- was at 11.5 letters from baseline with an additional 2.2 letters as well. In addition patients in the AVA-101 treatment arm had rescue injections with control as less than one per year. 

The other problem is that while AVA-101 did improve BCVA by that many letters, investors have to remember that this drug if approved would have to go up against Regeneron's (REGN) Eylea drug, and Roche's (RHHBY) Lucentis drug. Both of those drugs in late stage trials saw better visual acuity than these results reported today by Avalanche. That's not to say we can rule out AVA-101 completely, but the drug will definitely need to be fine tuned in phase 2b and ultimately in phase 3 clinical testing in hopes of competing with its standard of care counterparts. 

That means that AVA-101 performed better than placebo but investors should have seen that the results would have been compared to the big selling wet age-related macular degeneration drugs Eylea and Lucentis. Another problem was that AVA-101 is injected into the lower retina instead of the vitreous fluid like Eylea and Lucentis. This injection into the lower retina may have caused the side effect for AVA-101 patients to have retinal thickness increase compared to the placebo compound. There is a chance that Avalanche may come back from these results but at this point it has a lot of work ahead of itself.